Deck 6: Search and Unemployment

Question 1

The unemployment rate is

A) countercyclical
B) procyclical
C) a leading variable
D) smooth

Answer 1

countercyclical

Question 2

In the DMP model,

A) Each consumer decides between searching for work and home production.
B) Each consumer decides whether or not to accept a job.
C) Each consumer decides whether to start a new business or to seek employment as a worker.
D) Each consumer decides whether to stay in his or her existing job or search for a new job.

Answer 2

Each consumer decides between searching for work and home production.

Question 3

If N is the working-age population,Q is the labor force,and U is the number of unemployed,then the unemployment rate is measured as

A) U/N
B) U/Q
C) U/(N-Q)
D) Q/N

Answer 3

U/Q

Question 4

The participation rate was higher in 2012 than in 1948 because

A) the labor force was larger in 2012 than in 1948.
B) the unemployment rate became less variable over time.
C) of the Great Moderation
D) the participation rate of women rose between 1948 to 2012.

Question 5

If N is the working-age population,Q is the labor force,and U is the number of unemployed,then the employment/population ratio is measured as

A) N/Q
B) U/Q
C) (Q-U)/N
D) Q/N

Question 6

If N is the working-age population,Q is the labor force,and U is the number of unemployed,then the participation rate is measured as

A) U/N
B) Q/U
C) Q/N
D) (Q-U)/N

Question 7

The employment/population ratio is

A) more volatile than the participation rate.
B) roughly constant over time.
C) less volatile than the participation rate.
D) smaller in 2012 than in 1970.

Question 8

In the DMP model,

A) Firms maximize profits.
B) Firms determine how much effort they should put into filling job vacancies.
C) Firms decide whether or not to enter the labor market by posting vacancies.
D) Firms decide whether or not to retain or fire workers.

Question 9

An important feature of the DMP model is that

A) would-be workers care not just about the market wage, but about the chances of finding work.
B) firms can fire workers.
C) workers can choose to shirk on the job.
D) firms maximize revenue.

Question 10

If N is the working-age population,Q is the labor force,and U is the number of unemployed,then the employment/population ratio is measured as

A) N/Q
B) U/Q
C) (Q-U)/N
D) Q/N

Question 11

In the DMP model

A) the market wage is equal to the marginal product of labor.
B) the market wage is equal to the marginal rate of substitution of leisure for consumption.
C) the wage is equal to the marginal rate of transformation.
D) the wage is determined by bargaining between the firm and the worker.

Question 12

If A is the number of job vacancies in the aggregate,Q is the labor force,and U is the number of unemployed,then the vacancy rate is measured by

A) A/(A+Q-U)
B) A/(Q
C) A/(A+Q+U)
D) U/(A+Q-U)

Question 13

The matching function captures the idea that

A) consumers have to be paid to work.
B) supply and demand for labor determine the market wage.
C) it is costly and time-consuming to get firms and workers together to produce output.
D) firms are profit-maximizing.

Question 14

From 2009 to 2012

A) The Beveridge curve became flat.
B) The Beveridge curve shifted to the right.
C) The Beveridge curve cannot be discerned in the data.
D) The Beveridge curve shifted to the left.

Question 15

The average unemployment rate was lowest during what period?

A) 1980-1990
B) 1950-1970
C) 2000-2010
D) 1980-2000

Question 16

In the DMP model,

A) There are N firms, Q is the labor force, and N-Q is the vacancy rate.
B) There are N consumers, Q is the labor force, and N+Q is the number of consumers choosing home production.
C) There are Q consumers, N is the labor force, and N-Q is the number of consumers choosing home production.
D) There are N consumers, Q is the labor force, and N-Q is the number of consumers choosing home production.

Question 17

The participation rate is

A) countercyclical
B) more variable than GDP
C) procyclical
D) a leading variable

Question 18

The matching function exhibits all of the following properties except

A) diminishing marginal product of labor.
B) constant returns to scale.
C) increasing in matching efficiency.
D) increasing in inputs of searching consumers and firms.

Question 19

In the 1948-2012 data,the unemployment rate was highest in

A) 2009
B) 1991
C) 1975
D) 1982

Question 20

The negative correlation between the vacancy rate and the unemployment rate is called

A) The Laffer curve.
B) The Phillips curve.
C) The Fisher relation.
D) The Beveridge curve.

Question 21

A market failure associated with Keynesian economics is

A) pollution externalities.
B) economic agents cannot agree on prices and wages that are socially efficient.
C) insurance is imperfect.
D) banking panics.

Question 22

In the Keynesian DMP model,if the wage is high then

A) the vacancy rate is low.
B) the unemployment rate is low.
C) labor market tightness is high.
D) the labor force must be low.

Question 23

In the DMP model,a decrease in productivity

A) decreases the unemployment rate.
B) reduces the vacancy rate.
C) increases the unemployment rate.
D) increases the size of the labor force.

Question 24

In the DMP model,an increase in the unemployment insurance benefit does not,under any circumstances

A) increase the vacancy rate.
B) increase the unemployment rate.
C) reduce labor market tightness.
D) reduce the size of the labor force.

Question 25

In the DMP model,a decrease in the unemployment insurance benefit

A) increases the unemployment rate.
B) reduces labor market tightness.
C) reduces the unemployment rate.
D) reduces the vacancy rate.

Question 26

In the Keynesian DMP model

A) There is a fiscal multiplier.
B) The government post vacancies in the labor market.
C) There is no unemployment.
D) There can be more than one wage consistent with equilibrium.

Question 27

A decrease in matching efficiency

A) can never happen.
B) is due to a change in the productivity of firms.
C) is not related to sectoral shocks.
D) can explain the shift in the Beveridge curve.

Question 28

In the DMP model

A) the firm threatens the worker with separation and takes all the surplus from the match.
B) the firm's surplus from a match is equal to a constant fraction of total surplus.
C) the firm earns zero profits in a match.
D) when a match occurs, the firm is indifferent between continuing with the match and letting the worker go.

Question 29

In the DMP model,an increase in productivity does not

A) reduce the unemployment rate.
B) increase the vacancy rate.
C) increase labor market tightness.
D) increase the size of the labor force.

Question 30

In the DMP model,a decrease in matching efficiency

A) has no effect on vacancies.
B) reduces the unemployment rate.
C) increases labor market tightness.
D) increases the size of the labor force.