Deck 18: Employment and Unemployment

Question 1

To determine the unemployment rate,each month the government:

A)collects data from a survey of about 60,000 households nationwide
B)collects data from a survey of about 500,000 firms nationwide
C)records the number of people receiving unemployment compensation
D)conducts a full count of the number of unemployed in each state

Answer 1

A

Question 2

Which of the following non-working individuals would be considered officially unemployed by the Bureau of Labor Statistics?

A)John,who is beginning a 3-month vacation before reporting to his new job
B)Ronald,who two months ago gave up his job search in despair because he could not attract a job offer
C)Martha,who has not been on the job for the past four weeks because she broke her leg
D)Hiroshi,who is waiting to be called back to his job from which he was laid off five weeks ago

Answer 2

D

Question 3

The official BLS unemployment rate may overstate economic hardship because:

A)all part-time workers are considered fully employed
B)some workers may be underemployed
C)the unemployed include semi-retired workers and teens who wish to work only part-time
D)the unemployed include people who are not actively seeking work

Answer 3

C

Question 4

When the economy is at full-employment:

A)the unemployment rate is zero
B)unemployment is at its natural rate
C)the actual rate of inflation is less than expected
D)there is neither voluntary nor involuntary unemployment

Question 5

The employment-population ratio in Littleville is :

A)600/750
B)650/675
C)450/850
D)675/860

Question 6

The official BLS unemployment rate may understate economic hardship because

A)all part-time workers are considered fully employed
B)the unemployed include persons whose minimum acceptable wages are artificially high
C)some household members provide false information about search activity
D)the unemployed include semi-retired workers and teens who wish to work only part-time

Question 7

If flow 4 increases and flows 3 and 5 both decrease,then the unemployment rate will:

A)rise
B)fall
C)stay the same
D)change,but it cannot be determined how

Question 8

What is the official unemployment rate in Littleville?

A)400/1000
B)50/650
C)50/600
D)65/650

Question 9

If flow 2 increases,then the unemployment rate will go _____; if flow 6 decreases,then the unemployment rate will go _____.

A)up; up
B)up; down
C)down; up
D)down; down

Question 10

In 2006,the employment-population ratio was approximately:

A)54%
B)63%
C)71%
D)79%

Question 11

The size of the labor force in East MacNeil is:

A)800 persons
B)850 persons
C)880 persons
D)1000 persons

Question 12

Which one of the following would reduce the unemployment rate while leaving the size of the labor force unchanged?

A)An increase in flow 1
B)An increase in flow 2
C)An increase in flow 3
D)An increase in flow 6

Question 13

The term natural rate of unemployment refers to the unemployment rate that will occur:

A)whenever the actual rate of inflation exceeds the actual rate
B)if the actual rate of inflation is zero
C)if the expected rate of inflation is zero
D)in the long run if the actual rate of inflation equals the expected rate

Question 14

Flow 3 includes all of the following except:

A)discharges
B)layoffs
C)quits
D)retirements

Question 15

Since 1960,the employment-population ratio has:

A)trended upward but the unemployment rate has been highly variable
B)been highly variable but the unemployment rate has trended upward
C)trended downward but the unemployment rate has trended upward
D)remained fairly constant but the unemployment rate has trended downward

Question 16

Which one of the following would reduce the unemployment rate while leaving the number of unemployed persons unchanged?

A)An increase in flow 1
B)An increase in flow 2
C)An increase in flow 3
D)An increase in flow 6

Question 17

The official unemployment rate in East MacNeil is:

A)50/800
B)80/800
C)50/880
D)50/1000

Question 18

If jobless persons who had given up searching suddenly resumed active searches for paying jobs-but had not yet found any-the unemployment rate would:

A)rise
B)fall
C)stay the same
D)more information is needed

Question 19

An increase in the unemployment rate may be caused by a(n):

A)increase in flow 1
B)increase in flow 2
C)decrease in flow 5
D)increase in flow 6

Question 20

The number of officially employed persons in Littleville is:

A)450
B)525
C)600
D)675

Question 21

Of the 3.8 million workers displaced from their jobs between 2003 and 2005,by 2006 most:

A)were still unemployed
B)were employed in new jobs,with nearly all workers earning less than before
C)had dropped out of the labor force
D)were employed in new jobs,with about half the workers earning more than before

Question 22

According to the text,the current consensus estimate of the natural rate of unemployment is approximately:

A)2% - 3%
B)3% - 4%
C)4% - 5%
D)5% - 6%

Question 23

In the short run,the aggregate quantity supplied may exceed the full-employment level of output.This is because as the price level rises:

A)firms mistake lower real wage rates for lower money wage rates and therefore increase employment beyond the profit-maximizing level
B)firms mistake lower money wage rates for lower real wage rates and therefore increase employment beyond the profit-maximizing level
C)workers respond to falling real wage rates by working more hours,since the income effect outweighs the substitution effect
D)unemployed workers mistake higher nominal wage rates for higher real wage rates,causing employment and output to rise as they accept job offers more quickly

Question 24

If aggregate demand is given by AD₂,the economy will:

A)achieve the full-employment level of output in the short run
B)fall short of the full-employment level of output
C)exceed the full-employment level of output in the short run
D)experience frictional unemployment but not cyclical unemployment

Question 25

The unemployment rate at which there is neither excess demand nor excess supply in the aggregate labor market:

A)must be 0%
B)is called the natural rate of unemployment
C)will lead to higher inflation if pursued as a policy goal
D)corresponds to the rate we would observe if inflation were lower than had been expected

Question 26

If a drop in aggregate demand causes a recession,then over this range of real output the aggregate supply curve is:

A)vertical
B)downward sloping
C)upward sloping
D)inelastic

Question 27

Which of the following is a form of frictional unemployment?

A)Wait unemployment
B)Structural unemployment
C)Cyclical unemployment
D)Displaced workers

Question 28

If aggregate demand is given by AD₁,the economy will:

A)achieve the full-employment level of output
B)fall short of the full-employment level of output
C)exceed the full-employment level of output
D)experience frictional unemployment but not cyclical unemployment

Question 29

Structural unemployment is characterized by:

A)a geographical or skill-based mismatch between available jobs and job seekers
B)deficient aggregate demand
C)unemployment in excess of the natural rate
D)wage rigidity

Question 30

"As the domestic price level rises,consumers world-wide shift their purchases away from the U.S." This describes the:

A)domestic purchases effect
B)interest rate effect
C)real balances effect
D)foreign purchases effect

Question 31

Another name for demand-deficient unemployment is:

A)cyclical unemployment
B)recurring unemployment
C)structural unemployment
D)contractionary unemployment

Question 32

Which of the following is not typically given as a reason the aggregate demand curve slopes downward and to the right?

A)The real balances effect
B)The foreign purchases effect
C)The interest rate effect
D)The substitution effect

Question 33

Which of the following best describes the interest rate effect? As the price level rises:

A)more money is demanded,interest rates rise,and investment spending falls
B)less money is demanded,so consumption spending must fall to maintain equality of investment and saving c the value of assets rises,increasing bank profits and total lending
D)the Fed raises interest rates and investment spending rises

Question 34

The full-employment level of output is given by:

A)Q₁
B)Q₂
C)Q₃
D)Q₃ - Q₁

Question 35

The type of unemployment commonly associated with displaced workers is:

A)search unemployment
B)structural unemployment
C)wait unemployment
D)demand-deficient unemployment

Question 36

Which of the following best describes the real balances effect? As the price level rises,the real value of dollar-denominated assets:

A)rises,which leads people to increase spending on normal goods and services
B)rises,which leads people to decrease spending on normal goods and services
C)falls,which leads people to increase spending on normal goods and services
D)falls,which leads people to decrease spending on normal goods and services

Question 37

Compared to the 1960s,the natural rate of unemployment in the 1970s and 1980s was:

A)higher,because of changes in the composition of the labor force
B)higher,because of the failure of public policies to reduce it
C)lower,because of changes in the composition of the labor force
D)lower,because of the success of public policies to reduce it

Question 38

Which of the following is not a source of wait unemployment?

A)Temporary layoffs
B)Union job queues
C)Efficiency wages
D)Changes in the structure of the economy

Question 39

Demand-deficient unemployment occurs when:

A)a decrease in aggregate demand causes a decrease in the demand for labor,with little reduction in real wage rates
B)an increase in aggregate supply reduces wage rates,causing fewer people to seek jobs
C)a decrease in aggregate demand causes a decrease in wage rates,causing fewer people to seek jobs
D)a decrease in aggregate supply reduces consumer demand,thereby reducing the demand for labor

Question 40

Which one of the following is a true statement?

A)Higher levels of education are associated with higher levels of structural unemployment
B)During a recession,cyclical unemployment rises but structural unemployment falls
C)Historically,technological change has created more jobs than it has made obsolete
D)During a recession,most unemployment is structural unemployment

Question 41

Suppose that a policy response to cyclical unemployment is mistimed or overshoots its target,resulting in output above the full-employment level.Output will:

A)eventually return to the full-employment level because at some point,workers will no longer continue to supply as much labor at each nominal wage
B)eventually return to the full-employment level because nominal wage rates are rigid
C)eventually return to the full-employment level because workers will not adjust their acceptance wages
D)stay above the full-employment level until corrective policy action is taken

Question 42

Crowding out occurs when:

A)unemployment rises as a result of downward wage rigidity
B)unemployment rises because workers are displaced
C)government borrowing pushes up interest rates,causing private investment to fall
D)government borrowing pushes up interest rates,causing fiscal policy to overshoot the expansion of aggregate demand

Question 43

Fiscal policy to combat demand-deficient unemployment is an attempt to:

A)increase aggregate demand so that it intersects aggregate supply at the full-employment level of output
B)decrease aggregate demand so that it intersects aggregate supply at the full-employment level of output
C)increase the money supply by a constant 4% annual rate
D)decrease aggregate supply such that it intersects aggregate demand at the full-employment level of output

Question 44

Which of the following is not a source of downward wage rigidity?

A)Unions appear to prefer layoffs to wage reductions,as the former affects only workers without seniority,while the latter would affect all workers
B)Firms appear to prefer layoffs to wage reductions,as the former allows the firm to "hoard" workers in whom they have invested specific training
C)Implicit contracts between employers and their workers
D)Layoffs are discouraged due to the method used to finance unemployment compensation insurance

Question 45

Implicit contracts suggest that:

A)firms may lay off workers in return for granting then an "insurance policy" against wage reductions
B)firms may pay workers a lower wage in return for granting them an "insurance policy" against layoff
C)firms have a higher wage bill in recessions than during periods of economic expansion
D)firms have an incentive to contract with workers to pay them the going market wage

Question 46

Wages may be inflexible downward during a period of cyclical unemployment because:

A)insiders may fear harassment from outsiders who "stole" their jobs
B)outsiders may fear harassment from insiders and are thus unwilling to work for lower wages
C)firms believe that outsiders will withhold cooperation from insiders who "stole" their jobs
D)both insiders and outsiders will withhold cooperation from management if management reduces wages

Question 47

_____ of the unemployment rate differential between black and white men can be explained by characteristics like education and job experience,which suggests that discriminations plays _____ in the unemployment gap.

A)Nearly all; little or no role
B)Less than half; a role
C)Nearly all; a role
D)Less than half; little or no role

Question 48

Which of the following is a true statement?

A)Unemployment rates are greater for occupations requiring greater amounts of human capital
B)Historically,the black unemployment rate has been about twice that for whites
C)Historically,unemployment rates are very similar for all skill levels
D)Historically,the unemployment rate for females has been twice that of males

Question 49

An increase in government demand for output is a tool that would most likely be used to combat:

A)demand-deficient unemployment
B)search unemployment
C)structural unemployment
D)wait unemployment

Question 50

The unemployment rate for:

A)blue-collar workers is substantially higher than for white-collar workers
B)females is about double that for males
C)teenagers is about 25% higher than for those age 20 and over
D)African Americans is about four times that of whites

Question 51

Which one of the following government policies would most likely be used to reduce frictional unemployment?

A)Job matching programs
B)Expansionary fiscal policy
C)Job training and retraining programs
D)Expansionary monetary policy

Question 52

Which one of the following government policies would most likely be used to reduce structural unemployment?

A)Job matching programs
B)Expansionary fiscal policy
C)Job training and retraining programs
D)Expansionary monetary policy