Suppose that everyone who has looked for a job for more than six months gave up in despair and stopped looking. What would happen to the unemployment rate?It would increase. It would fall. It would not change. It would change, but the effect cannot be predicted.

It would fall

Explanation:

The unemployment rate measures the amount of people who are out of a job for at least 4 weeks, and are actively seeking to find a new job. If a person is not willing or able to search for a job, he/she is not considered unemployed nor part of the labor force.

If unemployed people just quit looking for jobs, the unemployment will decrease even though the number of people who are out a job increases. This happens because as soon as someone quits looking for new job, they are not considered unemployed anymore.

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