Question

What happens to the unemployment rate when unemployed workers are reclassified as discouraged workers?

Short answer

If unemployed workers become discouraged, then the measured percentage will remain fall.

Step-by-step solution

Step.1 Introduction

Those workers who do not have a job and eventually stop looking for one are referred to as discouraged workers. These workers are not included in the labor force.

Step.2 Explanation

If unemployed workers become discouraged, the measured percentage would decline. This is because discouraged workers are not counted in labor force or unemployed workers. So, the value of both will decline. As a result, unemployment rate, which is a ratio of the two will also fall.