Question

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, then
a. both the unemployment rate and labor-force participation rate would be higher.
b. both the unemployment rate and labor-force participation rate would be lower.
c. the unemployment rate would be higher, and the labor-force participation rate would be higher.
d. the unemployment rate would be lower, and the labor-force participation rate would be unaffected.

Answer 1

A. because they are working, so then by definition labor-force participation rate would be higher.