Deck 23: Unemployment

Question 1

The natural rate of unemployment is

A) The normal rate of unemployment around which the actual unemployment rate fluctuates.
B) The cyclical unemployment rate plus the structural unemployment rate.
C) The same thing as the rate of structural unemployment.
D) Excludes frictional unemployment.

Answer 1

A

Question 2

Table 1: Statistics from a fictional country ?

$\begin{array}{|l|c|}\hline & \text { Numbers in millions } \\\hline \text { Total population } & 195.4 \\\hline \text { Adult population } & 139.7 \\\hline \text { Number of unemployed } & 5.7 \\\hline \text { Number of employed } & 92.3 \\\hline\end{array}$
Refer to table 1. The unemployment rate is

A) 3.2 per cent.
B) 5.7 per cent.
C) 5.8 per cent.
D) 6.2 per cent.
E) Not enough information is available to answer.

Answer 2

5.8 per cent.

Question 3

Table 2. The figures in the table below are taken from the statistics office in a fictional country called Exland. $\begin{array}{|l|r|}\hline \text { Number of workers employed } & 8,400 \\\hline \text { Frictional unemployment } & 250 \\\hline \text { Structural unemployment } & 350 \\\hline \text { Cyclical unemployment } & 600 \\\hline \text { Discouraged workers } & 400 \\\hline \text { Adult population } & 12,000 \\\hline\end{array}$
Refer to table 2. How large is the labour force in Exland?

A) 7,550.
B) 8,000.
C) 8,400.
D) 9,600

Answer 3

9,600

Question 4

Paying efficiency wages tends to increase worker turnover because workers can get continually higher wages if they change employer often.

Question 5

The natural rate of unemployment is the amount of unemployment that won't go away on its own, even in the long run.

Question 6

If wages were always at the competitive equilibrium, there would be absolutely no unemployment.

Question 7

The amount of _____ _____increases when the economy goes into a recession and decreases when the economy goes into an expansion.

A) Structural unemployment
B) Seasonal unemployment
C) Cyclical unemployment
D) Frictional unemployment

Question 8

Table 2. The figures in the table below are taken from the statistics office in a fictional country called Exland. $\begin{array}{|l|r|}\hline \text { Number of workers employed } & 8,400 \\\hline \text { Frictional unemployment } & 250 \\\hline \text { Structural unemployment } & 350 \\\hline \text { Cyclical unemployment } & 600 \\\hline \text { Discouraged workers } & 400 \\\hline \text { Adult population } & 12,000 \\\hline\end{array}$
Refer to table 2. What is the labour force participation rate in Exland?

A) 12.5 per cent.
B) 25 per cent.
C) 60 per cent.
D) 80 per cent.

Question 9

Table 1: Statistics from a fictional country ?

$\begin{array}{|l|c|}\hline & \text { Numbers in millions } \\\hline \text { Total population } & 195.4 \\\hline \text { Adult population } & 139.7 \\\hline \text { Number of unemployed } & 5.7 \\\hline \text { Number of employed } & 92.3 \\\hline\end{array}$
Refer to table 1. The labour force participation rate is

A) 47.1 per cent.
B) 50.2 per cent.
C) 65.9 per cent.
D) 70.2 per cent.
E) None of these answers.

Question 10

If the number of people in work rises we can be certain that the unemployment rate falls.

Question 11

Table 1: Statistics from a fictional country ?
$\begin{array}{|l|c|}\hline & \text { Numbers in millions } \\\hline \text { Total population } & 195.4 \\\hline \text { Adult population } & 139.7 \\\hline \text { Number of unemployed } & 5.7 \\\hline \text { Number of employed } & 92.3 \\\hline\end{array}$

Refer to table 1. The labour force is

A) 92.3 million.
B) 98.0 million.
C) 134.0 million.
D) 139.7 million.
E) None of these answers.

Question 12

Whenever the wage rises above the competitive equilibrium, regardless of the source, the result is additional unemployment.

Question 13

A husband who chooses to stay home and take care of the household is

A) Employed.
B) Not in the labour force.
C) A discouraged worker.
D) Unemployed.

Question 14

The amount of unemployment that the economy normally experiences is known as

A) The natural rate of unemployment.
B) Cyclical unemployment.
C) Efficiency wage unemployment.
D) Frictional unemployment.

Question 15

Unions may increase efficiency in some circumstances because they decrease the cost of bargaining between labour and management.

Question 16

The presence of a union tends to raise the wage for insiders and lower the wage for outsiders.

Question 17

A minimum wage is likely to have a greater impact on the market for skilled workers than on the market for unskilled workers.

Question 18

A union is a labour cartel.

Question 19

Table 2. The figures in the table below are taken from the statistics office in a fictional country called Exland. $\begin{array}{|l|r|}\hline \text { Number of workers employed } & 8,400 \\\hline \text { Frictional unemployment } & 250 \\\hline \text { Structural unemployment } & 350 \\\hline \text { Cyclical unemployment } & 600 \\\hline \text { Discouraged workers } & 400 \\\hline \text { Adult population } & 12,000 \\\hline\end{array}$
Refer to table 2. What is the unemployment rate in Exland?

A) 12.5 per cent.
B) 15 per cent.
C) 16 per cent.
D) 24 per cent.

Question 20

Firms may voluntarily pay wages above the level that balances the supply and demand for workers because the higher wage improves the average quality of workers that apply for employment.

Question 21

It is difficult for cyclically unemployed persons to find jobs because

A) They typically do not meet the qualifications required for the available jobs.
B) The economy is in a recession.
C) They voluntarily quit their last jobs and employers may view them as unreliable.
D) They typically have not looked long enough to find a job.

Question 22

Some frictional unemployment is inevitable because

A) Of minimum wage laws.
B) There are changes in the demand for labour among different firms.
C) Of unions.
D) All of these answers
E) Efficiency wages may hold the wage above the equilibrium wage.

Question 23

Robert recently completed his university degree and is entering the labour market for the first time. He has been submitting applications and has been interviewed twice in the last two weeks, but so far has not found a job. Robert could be classified as

A) Frictionally unemployed.
B) Seasonally unemployed.
C) Structurally unemployed.
D) Cyclically unemployed.

Question 24

A miner who has been unable to find work for so long that he has stopped looking for work is considered to be

A) Not in the labour force.
B) Not in the adult population.
C) Unemployed.
D) Employed.

Question 25

To negotiate a higher wage rate, a union cannot

A) Start with a strike and then work to reach a contract to end the strike.
B) Negotiate in good faith and expect to hold its bargaining power.
C) Expect to maintain the same level of employment.
D) Offer a supply curve of labour that is horizontal.

Question 26

Efficiency wages are

A) Lower than market wages paid by employers to increase profitability.
B) Higher than market wages paid by employers to increase productivity.
C) Government-determined minimum wages set to protect workers from unfair employers.
D) Negotiated by unions when officials are interested in trimming work forces.

Question 27

Unions attempt to raise wage rates for their members by

A) Reducing the supply of the product their members produce.
B) Lowering barriers to entry so their members have greater opportunities.
C) Reducing the demand for labour so there are fewer non-union competitors.
D) Negotiating a higher wage rate through collective bargaining.

Question 28

Which of the following government policies would fail to lower the unemployment rate?

A) Establishing worker training programs
B) Establishing right-to-work laws
C) Reducing unemployment benefits
D) Establishing employment agencies
E) Raising the minimum wage

Question 29

Consider two labour markets in which jobs are equally attractive in all respects other than the wage rate. All workers are equally able to do either job. Initially, both labour markets are perfectly competitive. If a union organizes workers in one of the markets, then the wage rates will tend to

A) Rise in both markets.
B) Fall in both markets
C) Rise for the union jobs, but remain unchanged for the non-union jobs.
D) Rise for the union jobs and fall for the non-union jobs.

Question 30

Which of the following is an example of a reason why firms might pay efficiency wages? At equilibrium wages:

A) Workers sleep when the boss is not looking because workers are not deeply concerned about being fired.
B) Workers often quit to find better jobs.
C) Only minimally qualified workers apply for the job.
D) Workers cannot afford a healthy diet so they fall asleep at work due to a lack of energy.
E) All of these answers

Question 31

The labour force equals the

A) Number of people employed.
B) Number of people employed plus the number of people unemployed.
C) Number of people employed plus the number of people unemployed plus teenagers between ages 14 and 16 who work at least 10 hours a week.
D) Adult population.

Question 32

A reservation wage is the

A) Maximum wage the firm is willing to pay.
B) Tip necessary to get a waiter to reserve a table.
C) Minimum wage the worker is willing to accept.
D) Competitive equilibrium wage.

Question 33

Which one of the following types of unemployment results from the wage being held above the competitive equilibrium wage?

A) Structural unemployment
B) Cyclical unemployment
C) Frictional unemployment
D) None of these answers

Question 34

Markus is a low-skilled worker who washes dishes in a local restaurant. He is worried about a proposed increase in the minimum wage because price

A) Floors tend to create shortages.
B) Ceilings tend to create shortages.
C) Floors tend to reduce quantity demanded.
D) Ceilings tend to reduce quantity demanded.

Question 35

Suppose some country had an adult population of about 46 million, a labour-force participation rate of 75 percent, and an unemployment rate of 8 percent. How many people were employed?

A) 2.76 million
B) 31.74 million
C) 34.5 million
D) 42.32 million

Question 36

The labour-force participation rate is computed as

A) (Employed divided by Adult Population) x 100.
B) (Employed divided by Labour Force) x 100.
C) (Labour Force divided by Adult Population) x 100.
D) (Adult Population divided by Labour Force) x 100.

Question 37

A minimum wage law tends to

A) Help all teenagers because they receive a higher wage than they would otherwise.
B) Have no impact on unemployment as long as it is set above the competitive equilibrium wage.
C) Create more unemployment in high-skill job markets than in low-skill job markets.
D) Create more unemployment in low-skill job markets than in high-skill job markets.

Question 38

Unemployment insurance

A) Tends to increase unemployment by decreasing the cost of being unemployed.
B) Tends to decrease unemployment by providing limited resources to the unemployed.
C) Increases the hardships associated with unemployment.
D) Increases the amount of job security demanded by employees.

Question 39

If, for any reason, the wage is held above the competitive equilibrium wage,

A) The quantity of labour supplied will exceed the quantity of labour demanded and there will be unemployment.
B) Unions will likely strike and the wage will fall to equilibrium.
C) The quantity of labour demanded will exceed the quantity of labour supplied and there will be a labour shortage.
D) The quality of workers in the applicant pool will tend to fall.

Question 40

If the market for day care workers is in equilibrium at €5.00 per hour as shown in this diagram, a minimum wage of €8.00 per hour will increase unemployment by

A) 300 workers.
B) 500 workers.
C) 600 workers.
D) No workers.

Question 41

Which of the following statements about efficiency wage theory is true?

A) Paying above the competitive equilibrium wage tends to cause workers to shirk their responsibilities.
B) Firms do not have a choice about whether they pay efficiency wages or not because law does determine these wages.
C) Paying the lowest possible wage is always the most efficient (profitable).
D) Paying above the competitive equilibrium wage may improve worker health, lower worker turnover, improve worker quality, and increase worker effort.

Question 42

Why might a favourable change in the European economy, such as technological improvement or a decrease in the price of imported oil, be associated with an increase in frictional unemployment?

Question 43

Unions tend to increase the disparity in pay between insiders and outsiders by

A) Increasing the wage in the unionized sector, which may create a decrease in the supply of workers in the non-unionized sector.
B) Increasing the demand for workers in the unionized sector.
C) Decreasing the demand for workers in the unionized sector.
D) Increasing the wage in the unionized sector, which may create an increase in the supply of workers in the non-unionized sector.

Question 44

Teenage unemployment is higher than unemployment of people ages 20 and over. Explain why economists would attribute at least part of this difference to minimum-wage laws.

Question 45

Which of the following causes of unemployment is associated with a wage rate above the market equilibrium level?

A) Minimum-wage laws
B) Unions
C) Efficiency wages
D) All of the above are correct.

Question 46

Suppose that there is an excess supply of economics professors. Should universities necessarily reduce salaries? What does standard economic theory suggest? What does efficiency-wage theory suggest?

Question 47

Fill in the blank entries in the table. Population data in thousands.
Country
Adult
Population
Labour
Force
Employed
Unemployed
Unemployment
Rate
Labour-Force
Participation
Rate
A
109,474
62,510
3,500
B
26,870
2,577
57.41
C
70,159
39,591
9.69

Question 48

Which of the following types of unemployment will exist even if the wage is at the competitive equilibrium?

A) Unemployment due to unions
B) Unemployment due to efficiency wages
C) Frictional unemployment
D) Unemployment due to minimum-wage laws

Question 49

How can both the employment and the unemployment rate both rise in an economy?

Question 50

Since unemployment rates are consistently higher in some EU countries like Spain and Greece than in Germany, it appears that the natural rate of unemployment is lower in Germany. What might explain this difference?

Question 51

Which of the following is a cost of unemployment to the economy?

A) The opportunity cost of unemployment.
B) The tax and benefits effect.
C) The reverse multiplier effect.
D) All of the above.

Question 52

What is the theory of efficiency wages? Provide four reasons that employers might pay efficiency wages.

Question 53

If the cost of monitoring worker effort is high, then a firm can encourage workers to work hard by paying an efficiency wage because

A) Paying an efficiency wage means a firm can monitor its workers more cheaply.
B) The efficiency wage will encourage workers to monitor each other's effort and report shirking to the employer.
C) Efficiency wages guarantee efficiency.
D) The efficiency wage will raise the cost to workers of losing their jobs, even though there may be a low risk of being dismissed for shirking.

Question 54

Which of the following is a cost of unemployment to the individual?

A) De-skilling
B) The tax and benefits effect
C) The reverse multiplier effect
D) The opportunity cost of unemployment.

Question 55

Most spells of unemployment are short, and most unemployment observed at any given time is long term. How can this be?

Question 56

Why have labour-force participation rates for women in Europe increased while labour-force participation rates for men have decreased?

Question 57

Unions might increase efficiency in the case where they

A) Raise the wage for insiders above the competitive equilibrium.
B) Lower the wage of local outsiders.
C) Offset the market power of a large firm that is the dominant employer in a region.
D) Threaten a strike but don't actually follow through so there are no lost hours of work.

Question 58

Why does unemployment impose a cost to the economy and society as a whole?

Question 59

Which of the following is not a reason economies experience structural unemployment?

A) Job search
B) Unions
C) Minimum-wage laws
D) Efficiency wages

Question 60

If unemployment insurance were so generous that it paid laid off workers 95 per cent of their regular salary,

A) Frictional unemployment would fall.
B) The official unemployment rate would probably understate true unemployment.
C) The official unemployment rate would probably overstate true unemployment.
D) There would be no impact on the official unemployment rate.
E) None of these answers