Question : The unemployment rate is calculated by dividing the number of unemployed people by the:

Option 1: Total population

Option 2: Labor force

Option 3: Working-age population

Option 4: Employed population

Correct Answer: Labor force

Solution : The correct answer is (b) Labor force

The unemployment rate is calculated by dividing the number of unemployed people by the labor force and then multiplying by 100 to express it as a percentage. The labor force consists of individuals who are either employed or actively seeking employment.

Calculating the unemployment rate using the labor force as the denominator provides a more accurate measure of the proportion of unemployed individuals in the population who are actively participating in the workforce. It excludes individuals who are not working and not actively seeking employment, such as students, retirees, and discouraged workers who have given up searching for a job.

Using the total population or the working-age population as the denominator would not accurately represent the unemployment rate since these measures include individuals who may not be part of the labor force, such as children, individuals with disabilities, or those who have chosen not to participate in the workforce for various reasons.

Similarly, using the employed population as the denominator would not provide an accurate unemployment rate as it does not take into account individuals who are unemployed but actively seeking employment.