The economy was initially in equilibrium at point 3 and interest rates increased by 4 percentage points because of government deficit financing. The public spending, however, improves business confidence and activity that exactly offsets the potential crowding-out effect. This situation would result in a new equilibrium at point:

The unemployment rate will decrease whenever there is a(n):

a. increase in the number of persons classified as unemployed. b. decrease in the number of unemployed relative to the size of the labor force. c. decrease in the size of the population and there is no change in the number of persons classified as employed. d. reduction in the size of the labor force. e. decrease in the number of unemployed and the population does not change.

The official unemployment rate may not reflect the true state of unemployment because:

a. part-time employees who want to work more hours are treated the same statistically as those who hold full-time jobs. b. some individuals who want to work may become discouraged and cease actively looking for work c. workers laid off from their jobs and looking for new ones are not counted among the unemployed. d. (a) and (b) only.