What is the public misconceptions on what the Unemployment Rate measures? What are the consequences of...

What is the public misconceptions on what the Unemployment Rate measures? What are the consequences of the public misunderstanding this information, particularly in terms of how their response influences our economic system?

Expert Solution

General public inlcudes the such people unemployed who are not looking for job but in legal system such individuals are called discouraged workers and these workers are not considered unemployed. but Public consider them unemployed and tends to overestimate unemployment rate. Further, public is not well acquainted with concept of natural rate of unemployment.

Consequences:

Public overestimates unemployment rates.
Public misjudge public policies with respect to the unemployment policies of government.
Public reaction may lead to such policies which may spur inflationary pressures in an economy

Rahul Sunny answered 2 years ago

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