the US unemployment rate tends to understate the actual level of enemployment in
ID: 1198864 • Letter: T
Question
the US unemployment rate tends to understate the actual level of enemployment in the US, while the US inflation rate tends to overstate the actual level of US inflation. Why is this? the US unemployment rate tends to understate the actual level of enemployment in the US, while the US inflation rate tends to overstate the actual level of US inflation. Why is this? the US unemployment rate tends to understate the actual level of enemployment in the US, while the US inflation rate tends to overstate the actual level of US inflation. Why is this?Explanation / Answer
The unemployment rate is considered to be a percentage of unemployed people out of the total labor force. Calculation of labor force as well as the estimation of unemployed and employed people is a complex process that is not fool proof. Consideration of, discouraged workers and/ or part time workers make it a further complex process. Also, state of the economy plays an important role in the unemployment rate. Thus, it can be said that the unemployment rate understates the actual level of employment.
Again, inflation rate is based upon the increase in prices of the basket of goods and services. The inflation rate is also calculated on the basis of price rise during a particular period of time. Sudden rise in prices will suddenly increase the inflation figure that was normal in previous calculations. Also, inflation as CPI or WPI reflects the overall price rise. It does not show the price rise in individual commodity. Thus, it tends to be overstated upon the actual inflation rate.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.