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Chapter 8: Q 38 (page 215)

Under what condition would a decrease in

unemployment be bad for the economy?

Short Answer

Expert verified

Unemployment rate depicts percentage of individuals unemployed in total labor force

Step by step solution

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01

Step 1. Unemployed people

Unemployed people: People who are looking for job but are not able to find it.

02

Step 2. Discouraged workers

those workers who are eligible for jobs but have they have stopped looking for job because they might not find suitable options they are looking for.

03

Step 3. Reason

Increase in unemployment does not always means country is not doing good. Discouraged workers are not considered as unemployed nor they are included in labor force.

So, if these discouraged workers join the labor force again and start looking for work it would contribute to increased unemployment. But this increase would not be a bad sign for the economy.

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Most popular questions from this chapter

Whose unemployment rates are commonly higher in the U.S. economy: a. Whites or nonwhites? b. The young or the middle-aged? c. College graduates or high school graduates?

What is structural unemployment? Give examples of structural unemployment.

Is the increase in labor force participation rates among women better thought of as causing an increase in cyclical unemployment or an increase in the natural rate of unemployment? Why?

Suppose the adult population over the age of 16 is 237.8 million and the labor force is 153.9 million (of whom 139.1 million are employed). How many people are “not in the labor force?” What are the proportions of employed, unemployed and not in the labor force in the population? Hint: Proportions are percentages.

The U.S. unemployment rate increased from 4.6%

in July 2001 to 5.9% by June 2002. Without studying the subject in any detail, would you expect that a change of this kind is more likely to be due to cyclical unemployment or a change in the natural rate of unemployment? Why?
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