Final answer:
When Matilda stops working and does not actively seek a new job, the unemployment rate increases and the labor-force participation rate decreases. Labor force participation reflects the adult population engaged in or seeking work; Matilda's inactivity reduces this rate even though she is without employment.
Step-by-step explanation:
When Matilda decides to take a break from looking for work and opts to spend time on the beach, the unemployment rate increases due to her no longer being employed. Meanwhile, the labor-force participation rate decreases because she is not actively looking for a job and is thus not considered part of the labor force. If individuals like Matilda, who are able to work, choose not to seek employment, they are classified as out of the labor force rather than unemployed.
The labor force participation rate reflects the proportion of the adult population that is engaged in the labor market, either by working or actively looking for work. When employed individuals stop looking for work and become discouraged workers, as in the case of Matilda, they are no longer counted in the labor force, which can lead to a paradox where the actual number of jobs decreases but the unemployment rate falls simultaneously. This is because the unemployment rate is determined by the number of unemployed people who are actively seeking work divided by the total number of individuals in the labor force.