Suppose That Some People Report Themselves as Unemployed When, in Fact

question 86

Multiple Choice

Suppose that some people report themselves as unemployed when, in fact, they are working in the underground economy. If these persons were counted as employed, how would the labour statistics change?

• A) The unemployment rate and the labour-force participation rate would be higher.
• B) The unemployment rate and the labour-force participation rate would be lower.
• C) The unemployment rate would be higher, and the labour-force participation rate would be lower.
• D) The unemployment rate would be lower, and the labour-force participation rate would be unaffected.

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Definitions:

Contribution Margin Ratio

The percentage of sales that exceeds variable costs, showing how much revenue is available to cover fixed costs and generate profit.

Fixed Costs

Costs that remain constant regardless of a company's level of activity, including expenses like rent, salaries, and insurance.

Actual Sales

The real revenue generated from goods or services sold by a business, as opposed to projected or forecasted sales.

Activity Base

A measure or quantity (e.g., labor hours, machine hours) used in allocating overhead costs to products or services, reflecting the cause-and-effect relationship between cost drivers and costs.