(Answered) If there is a decrease in the labor force participation rate, what will be the impact on the FE…

➤ Is a lower participation rate the same as a change in the unemployment or natural rate?
Not necessarily. Measured unemployment can fall if discouraged workers exit the labor force, while the economy’s potential output still declines. The natural level of output falls with participation, even if the unemployment rate looks unchanged or lower. Labor-market flows determine the unemployment measurement effect.