Deck 12: Unemployment

Question 1

Centerville has 200 unemployed people. Of these 200 people, 35 are unemployed for two weeks before finding a new job, 55 are unemployed for four weeks before finding a new job, 30 are unemployed for six weeks before finding a new job, 15 are unemployed for 10 weeks before finding a new job, and 65 are unemployed for 15 weeks before finding a new job. Approximately what is the average spell of unemployment in Centerville?

A) 2 weeks
B) 5 weeks
C) 8 weeks
D) 11 weeks
E) 14 weeks

Answer 1

C

Question 2

The United States funds its unemployment compensation system by taxing

A) all firms at the same rate.
B) older, larger firms at a higher rate than younger, smaller firms.
C) firms more when they have a history of causing more layoffs, up to a point.
D) firms more when they have greater profits so that they can afford the additional taxes.
E) nonunion firms more than union firms because union firms pay higher wages on average.

Answer 2

C

Question 3

In the United States from 1950 to 2000, it was most likely that an unemployed person would

A) be re-employed in less than 5 weeks.
B) be re-employed in 5 to 14 weeks.
C) be re-employed in 14 to 26 weeks.
D) be re-employed in more than 26 weeks.
E) exit the labor force.

Answer 3

A

Question 4

If the steady-state unemployment rate for an economy is 5% and each period 2% of employed workers lose their jobs, what percent of unemployed workers find employment each period?

A) 8%
B) 18%
C) 28%
D) 38%
E) 48%

Question 5

James is currently unemployed. He is disappointed every Sunday when none of the job advertisements in the newspaper are for workers with his particular skill set. What type of unemployment is James experiencing?

A) frictional unemployment
B) seasonal unemployment
C) cyclical unemployment
D) structural unemployment
E) natural unemployment

Question 6

Why is frictional unemployment considered to be productive?

A) Search activities of workers and firms resulting in frictional unemployment improve the allocation of resources.
B) Firms do not hire a worker until they find the most educated worker.
C) There are more potential workers seeking jobs than there are jobs for workers when there is frictional unemployment.
D) The demand for highly skilled workers exceeds the supply of highly skilled workers when there is frictional unemployment.
E) Frictional unemployment leads to a decrease in the unemployment rate.

Question 7

Which of the following would not increase the asking wage?

A) The government expands unemployment insurance benefits from 26 to 52 weeks.
B) The government increases the maximum weekly unemployment benefit from $500 to $800.
C) The unemployment rate increases.
D) One's spouse receives a pay raise.
E) The government stops taxing unemployment insurance benefits.

Question 8

In the United States, the average replacement ratio associated with unemployment insurance benefits is

A) 10%.
B) 35%.
C) 50%.
D) 80%.
E) 100%.

Question 9

What does it mean to conduct a sequential search?

A) to search for jobs even when employed
B) to accept a job offer from an employer, but then to still search for a better job offer
C) to accept the first job that one is offered
D) to apply to all job openings
E) to determine an asking wage and then accept the first job offer that pays a wage equal to or greater than the asking wage

Question 10

Consider an economy with a labor force of 100 million people. Each period, 60% of the unemployed population finds a job while 15% of the employed population loses their job. What is the steady-state unemployment rate in the economy?

A) 5%
B) 10%
C) 15%
D) 20%
E) 60%

Question 11

Which age group experiences the highest rates of unemployment in the United States?

A) 16 to 24 years old.
B) 25 to 34 years old.
C) 35 to 44 years old.
D) 45 to 54 years old.
E) 55 to 64 years old.

Question 12

What is the general relationship between race and unemployment rates in the United States?

A) Whites have the lowest rate of unemployment; Hispanics have the highest rate of unemployment.
B) Whites have the lowest rate of unemployment; blacks have the highest rate of unemployment.
C) Hispanics have the lowest rate of unemployment; whites have the highest rate of unemployment.
D) Hispanics have the lowest rate of unemployment; blacks have the highest rate of unemployment.
E) Blacks have the lowest rate of unemployment; Hispanics have the highest rate of unemployment.

Question 13

What is the best description of unemployment insurance benefits in the United States?

A) All unemployed workers receive the same benefit regardless of what their previous job was.
B) All unemployed workers receive the same wage-adjusted benefit regardless of what state they live in.
C) Unemployment benefits are based on family size and age.
D) The dollar value of unemployment benefits is greater for low-wage workers than for high-wage workers.
E) Unemployment benefits are a greater percentage of previous earnings for low-wage workers than for high-wage workers.

Question 14

According to the neoclassical model, what would not result from the government levying a tax on firms for each worker the firm lays off?

A) Firms would be less likely to lay off workers.
B) Firms would be less likely to hire workers.
C) Moral hazard would encourage workers to not work as hard as before.
D) The long-run unemployment rate would decrease.
E) Unemployed workers would remain unemployed for longer periods of time.

Question 15

Consider an economy with a labor force of 200 million people of which 180 million are employed while 20 million are unemployed. Each period, 45% of the unemployed population finds a job. If the economy is in a steady-state of unemployment, what percent of the employed population lose their job each period?

A) 5%
B) 10%
C) 15%
D) 20%
E) 25%

Question 16

How does the asking wage depend on the unemployment insurance (UI) system in the United States?

A) The asking wage is constant regardless of the unemployment insurance system.
B) The asking wage will fall as the unemployed worker gets closer to exhausting his or her UI benefits.
C) The asking wage is lower while receiving UI benefits than after one's UI benefits have expired.
D) The asking wage is lower the more likely it is to receive a job offer.
E) The asking wage is lower the more skills the unemployed worker has.

Question 17

How are unemployment rates in the United States related to education?

A) Unemployment rates are unrelated to education.
B) Higher levels of education are associated with higher rates of unemployment.
C) Higher levels of education are associated with lower rates of unemployment.
D) Unemployment rates are highest for high school dropouts but are unrelated to education for anyone who has a high school degree or more.
E) Unemployment rates for high school dropouts and high school graduates are roughly equal and are less than the overall unemployment rate of college graduates.

Question 18

An important development during the Great Recession (roughly 2008-2012) was that

A) more than 35 percent of all unemployed workers remained unemployed for more than 26 months.
B) most than 50 percent of all unemployed workers remained unemployed for 13 to 26 weeks.
C) the unemployment rate increased dramatically but the average unemployment spell remained constant at about 8 weeks of unemployment.
D) more than 70 percent of all unemployed workers exited unemployment within 5 weeks; however, most of this movement was due to the unemployed becoming discouraged and exiting the labor force rather than finding a job.
E) the amount of frictional and seasonal unemployment increased dramatically while the amount of structural unemployment decreased substantially.

Question 19

Compared to a labor market that has no unemployment benefit system, the unemployment insurance system of the United States probably

A) leads to shorter spells of unemployment.
B) increases the unemployment rate.
C) leads to lower post-unemployment wages.
D) provides for a lower standard of living while unemployed.
E) is less costly for firms.

Question 20

Anna works on a farm every spring during planting season and every fall during the harvest season. The farm fails to employ Anna during the summer or the winter. What type of unemployment does Anna experience?

A) frictional unemployment
B) seasonal unemployment
C) cyclical unemployment
D) structural unemployment
E) natural unemployment

Question 21

Firms are most likely to set an efficiency wage above the competitive wage if

A) the firm does not know what the competitive wage is.
B) workers refuse to work at the competitive wage.
C) most of its workers are not educated.
D) firms find it expensive to monitor worker output.
E) the firm is not concerned with maximizing profits.

Question 22

The sectoral shifts hypothesis claims that

A) cyclical unemployment will always exceed frictional unemployment.
B) frictional unemployment will cause workers to extend their temporary lay-offs.
C) most unemployed workers will return to their previous job because the firm knows the skills of the worker.
D) there will always be a pool of unemployed workers who find jobs quickly (i.e., the frictionally unemployed).
E) there will always be a pool of unemployed workers who experience long spells of unemployment because their skills do not match those that employers are looking for (i.e., the structurally unemployed).

Question 23

If the intertemporal substitution hypothesis is correct, then

A) the unemployment rate is always artificially high.
B) the unemployment rate is always artificially low.
C) discouraged workers should be included in the unemployed population because they actually want a job at the going wage.
D) discouraged workers should not be included in the unemployed population because they are optimally choosing more leisure during a time of low wages.
E) discouraged workers will not exist.

Question 24

Which one of the following statements regarding the intertemporal substitution hypothesis is false?

A) Workers are willing reduce labor supplied during a recession.
B) Increases in unemployment may be voluntary as workers collect unemployment insurance benefits.
C) Increases in unemployment may be voluntary as workers trade income for leisure during low-wage periods.
D) Wages and hours of leisure will tend to move together over the course of the life-cycle.
E) Labor supply responds to changes in the real wage.

Question 25

The main argument in favor of the existence of a natural rate of unemployment in the long run focuses on what argument?

A) Workers will adjust their inflationary expectations in the long run so that unemployment is unrelated to inflation.
B) Workers refuse to be unemployed in the long run.
C) Firms need to be at full employment in the long run.
D) Wages will always adjust to make the long-run unemployment rate zero percent.
E) The government cannot affect inflation in the long run.

Question 26

Which of the following statements about unemployment that is indicative of sectoral shifts hypothesis is not correct?

A) Unemployment spells will be longer the more firm-specific and industry-specific skills are.
B) Unemployment rates for sectoral shifts reasons will vary by industry and occupation.
C) When an industry experiences a negative shock, those workers who become unemployed will eventually become employed in new industries when the new industries adjust their needs to the existing skills of the unemployed.
D) When an industry experiences a negative shock, those workers who become unemployed will eventually become employed in new industries after they adjust their skills to match the needs of new, growing industries.
E) All of these are indicative of the sectoral shifts hypothesis.

Question 27

The Phillips Curve relates

A) the unemployment rate to economic growth.
B) the unemployment rate to inflation.
C) the unemployment rate to the real wage.
D) the real wage to total employment.
E) the real wage to the natural rate of unemployment.

Question 28

The short-run Phillips curve is ________, while the long-run Phillips curve is vertical at the ________.

A) downward sloping; real wage
B) downward sloping; natural rate of unemployment
C) upward sloping; minimum wage
D) upward sloping; average nominal wage rate
E) horizontal; origin

Question 29

Which is not a property of an optimal efficiency wage?

A) There is involuntary unemployment.
B) The efficiency wage is higher than the competitive wage.
C) Employed workers will not shirk on the job.
D) Any structural unemployment that results from an efficiency wage is efficient for the economy as it helps sort nonshirkers and shirkers into good and bad jobs, respectively.
E) Employment will be less with an efficiency wage than with a competitive wage.

Question 30

Which of the following is the main argument for why efficiency wages can help encourage workers to provide full effort on a job?

A) Workers do not want to risk becoming unemployed when there is a reserve of involuntary unemployed workers willing to take their job that pays above the competitive wage.
B) Workers do not understand that high-wage workers do not need to work hard to maintain their job.
C) Management hires fewer workers at the higher efficiency wage, and therefore all workers must work harder.
D) When the efficiency wage is less than the competitive wage, workers work harder in order to convince other firms to hire them away at the higher, competitive wage.
E) None of these provide an argument for why efficiency wages encourage workers to provide full effort on a job.