10. Suppose you see the unemployment rate rising and the labor force participati

Question

10.   Suppose you see the unemployment rate rising and the labor force participation rate falling. Which of the following could, on its own, explain this data? A.  retired workers leave retirement and are immediately employed. B.  unemployed workers are retiring early. C.  retired workers leave retirement to look for a job. D.  employed workers are retiring early. E.  More children reach adulthood, but do not get a job or look for one. 10.   Suppose you see the unemployment rate rising and the labor force participation rate falling. Which of the following could, on its own, explain this data?

Explanation / Answer

Ans:

Option D

employed workers are retiring early.

Analysis

Labor force = employed + unemployed

Unemployment rate = unemployed / labor force

As employed workers are retiring early, labor force decreases but number of unemployed will be same.This will result in unemployment rate to rise.

Labor force participation rate = labor force / Adult population

As employed workers are retiring early, labor force decreases and this will cause the labor force participation rate to fall.

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