Answer to Question #192766 in Macroeconomics for simthembile

Question

• Explain whether it is possible for the amount of employed people to decrease while the unemployment rate decreases.

Answer 1

No, because any increase in the number of unemployed will not result in an increase in the unemployment rate. It is quite possible for the participation rate to fall at the same time that the employment ratio is rising.

For example, suppose that the population is constant, the labor force declines, employment rises, and unemployment falls. Low unemployment is usually regarded as a positive sign for the economy. A very low or even no rate of unemployment will have negative consequences and impacts such as inflation and reduced productivity