Question 1

Reducing the natural rate of unemployment requires reducing the rate of job separation and increasing the rate of job finding. Explain at least one policy that will impact each of these aspects of the natural rate of unemployment.

Accepted Answer

The answer of Reducing the natural rate of unemployment requires...

Question 2

Explain how paying efficiency wages can help employers overcome both moral hazard and adverse selection problems in employment.

Accepted Answer

The answer of Explain how paying efficiency wages can help...

Question 3

If paying efficiency wages higher than market-level should always be a problem for employers, then how is paying efficiency wages helpful for employers?

Accepted Answer

The answer of If paying efficiency wages higher than market-level...

Question 4

Consider two countries: Flexiland and Stuckland. The labor force in each country consists of 100,000 workers. In Flexiland a different 500 workers are unemployed each month. In Stuckland the same 500 workers are unemployed for the entire year. Compare and contrast the unemployment situation in the two countries by explaining:

a. the unemployment rate,
b. the number of spells of unemployment,
c. the average durati on of each unemployment spell, and
d. whether the unemployment is more likely to be frictional or structural.

Accepted Answer

The answer of Consider two countries: Flexiland and Stuckland. The...

Question 5

In an economy, if 5 percent of the employed lose their job every month (s = 0.05) while 15 percent of the unemployed find a job every month (f = 0.15), what is the steady rate of unemployment of the economy?

Accepted Answer

The answer of In an economy, if 5 percent of...

Question 6

"The unemployment rate can be reduced by decreasing the rate of job separation and increasing the rate of job finding." What measures can government take to help control these rates? Give one example for each.

Accepted Answer

The answer of "The unemployment rate can be reduced by...

Question 7

If 250 workers are unemployed for a period of 1 month, 150 for the period of 6 months and 100 for the period of 12 months in a given year, how many spells and months of unemployment occur during a year?

Accepted Answer

The answer of If 250 workers are unemployed for a...

Question 8

A country has changed its labor laws and decreased the minimum age of working from 18 years to 16 years. What is the effect of this change on equilibrium wages?

Accepted Answer

The answer of A country has changed its labor laws...

Question 9

Explain how technological changes that have reduced the demand for low-skilled workers can change the natural rate of unemployment.

Accepted Answer

The answer of Explain how technological changes that have reduced...

Question 10

The average unemployment rate in western Europe is higher than in the United States.

a. Explain one difference between the European and U.S. economies that is consistent with more structural unemployment in Europe.
b. Explain one difference between the European and U.S. economies that is consistent with more frictional unemployment in Europe.

Accepted Answer

The answer of The average unemployment rate in western Europe...

Question 11

If a country has a higher unionization rate, will that lead to a higher unemployment rate also?

Accepted Answer

The answer of If a country has a higher unionization...

Question 12

When an economy enters expansion, the unemployment rate first increases and then decreases. Why does this happen?

Accepted Answer

The answer of When an economy enters expansion, the unemployment...

Question 13

Assume that the real wage in an economy is held above equilibrium.

a. Graphically illustrate how an increase in technology that raises the demand for labor will change the number of unemployed workers. Be sure to label the axes and the quantities of labor hired before and after the technological progress.
b. Explain in words what happens to the number of unemployed as a result of this change.

Accepted Answer

The answer of Assume that the real wage in an...

Question 14

It is said that some frictional unemployment is inevitable. What is the reason that some frictional unemployment is inevitable?

Accepted Answer

The answer of It is said that some frictional unemployment...

Question 15

Explain what type of wage rigidity is most likely to affect the unemployment rates of the following types of workers:

a. workers with low marginal labor productivity,
b. workers in the construction trades, such as plumbers and electricians,
c. workers engaged in creative work that is not easily monitored.

Accepted Answer

The answer of Explain what type of wage rigidity is...

Question 16

Since 1960 there has been a substantial increase in unemployment rates in major European countries. Give two reasons for this happening in Europe.

Accepted Answer

The answer of Since 1960 there has been a substantial...

Question 17