Labor Market Changes and the Unemployment Rate
Over the course of a year, an economy experiences the following labor market shifts: 2 million people lose their jobs but continue to seek employment, 3 million unemployed people find jobs, and 4 million unemployed people stop seeking work. What is the net effect on the official unemployment rate?
A
Decreases, as more people found jobs than lost them
B
Increases, as the labor force contracted
C
Remains unchanged due to offsetting factors
D
Ambiguous; depends on initial labor force size
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