Deck 6: Unemployment

Question 1

All of the following are reasons for frictional unemployment except:

A)workers have different preferences and abilities.
B)unemployed workers accept the first job offer that they receive.
C)the flow of information is imperfect.
D)geographic mobility takes time.

Answer 1

unemployed workers accept the first job offer that they receive.

Question 2

In a steady state:

A)no hiring or firings are occurring.
B)the number of people finding jobs equals the number of people losing jobs.
C)the number of people finding jobs exceeds the number of people losing jobs.
D)the number of people losing jobs exceeds the number of people finding jobs.

Answer 2

the number of people finding jobs equals the number of people losing jobs.

Question 3

Economists call the changes in the composition of demand among industries and regions:

A)insider-outsider conflicts.
B)sectoral shifts.
C)moral hazard.
D)adverse selection.

Answer 3

sectoral shifts.

Question 4

If the steady-state rate of unemployment equals 0.125 and the fraction of unemployed workers who find jobs each month (the rate of job findings) is 0.56, then the fraction of employed workers who lose their jobs each month (the rate of job separations) must be:

A)0.08.
B)0.125.
C)0.22.
D)0.435.

Question 5

Unemployment caused by the time it takes workers to search for a job is called unemployment.

A)frictional
B)structural
C)efficiency
D)insider

Question 6

Sectoral shifts:

A)lead to wage rigidity.
B)explain the payment of efficiency wages.
C)depend on the level of the minimum wage.
D)make frictional employment inevitable.

Question 7

If the number of employed workers equals 200 million and the number of unemployed workers equals 20 million, the unemployment rate equals percent (rounded to the nearest percent).

A)0
B)9
C)10
D)20

Question 8

The natural rate of unemployment is:

A)the average rate of unemployment around which the economy fluctuates.
B)about 10 percent of the labor force.
C)a rate that never changes.
D)the transition of individuals between employment and unemployment.

Question 9

One reason for unemployment is that:

A)it takes time to match workers and jobs.
B)all jobs are identical.
C)the labor market is always in equilibrium.
D)a laid-off worker can immediately find a new job at the market wage.

Question 10

Which of the following is an example of frictional unemployment?

A)Dave searches for a new job after voluntarily moving to San Diego.
B)Elaine is willing to work for less than the minimum wage, but employers cannot hire her.
C)Bill is qualified and would like to be an airline pilot, but airlines do not find it profitable to hire him at the wage established by the airline pilot's union.
D)Joan is willing to work at the going wage, but there are no jobs available.

Question 11

Unemployment insurance increases the amount of frictional unemployment by:

A)making workers more frantic in their search for new jobs.
B)inducing workers to accept the first job offer that they receive.
C)making employers more reluctant to lay off workers.
D)softening the economic hardship of unemployment.

Question 12

If s is the rate of job separation, f is the rate of job finding, and both rates are constant, then the unemployment rate is approximately:

A)f/(f + s).
B)(f + s)/f.
C)s/(s + f).
D)(s + f)/s.

Question 13

The natural rate of unemployment in the United States since 1950 has averaged between and percent.

A)0; 1
B)1; 3
C)5; 6
D)10; 15

Question 14

Any policy aimed at lowering the natural rate of unemployment must either the rate of job separation or the rate of job finding.

A)reduce; reduce
B)increase; increase
C)reduce; increase
D)increase; reduce

Question 15

A typical worker in the United States who is covered by unemployment insurance receives percent of his or her former wages for weeks.

A)50; 26
B)50; 52
C)67; 26
D)67; 52

Question 16

The macroeconomic problem that affects individuals most directly and severely is:

A)inflation.
B)unemployment.
C)low savings.
D)low investment.

Question 17

Frictional unemployment is inevitable because:

A)different sectors do not shift.
B)the economy needs to be lubricated.
C)workers never quit their jobs to change careers.
D)the demand for different goods always fluctuates.

Question 18

In the model of the steady-state unemployment rate with a fixed labor force, the rate of job finding equals the percentage of the who find a job each month, while the rate of job separation equals the percentage of the who lose their job each month.

A)labor force; labor force
B)labor force, unemployed
C)employed, labor force
D)unemployed, employed

Question 19

Frictional unemployment is unemployment caused by:

A)wage rigidity.
B)minimum-wage legislation.
C)the time it takes workers to search for a job.
D)clashes between the motives of insiders and outsiders.

Question 20

The unemployment rate in the United States since 1952 has:

A)never been close to zero.
B)gravitated toward a steady-state rate of zero.
C)remained constant from year to year.
D)equaled the natural rate of unemployment in every year.

Question 21

Wage rigidity:

A)forces labor demand to equal labor supply.
B)is caused by sectoral shifts.
C)prevents labor demand and labor supply from reaching the equilibrium level.
D)increases the rate of job finding.

Question 22

The minimum wage:

A)is usually about 75 percent of the average wage earned in manufacturing.
B)raises the wages of highly skilled workers.
C)encourages master workers to take on apprentices.
D)has its greatest impact on teenage unemployment.

Question 23

Which of the following is the best example of structural unemployment?

A)Tim is looking for a job with flexible hours, but has not been offered one yet.
B)Vickie lost her job as a graphic artist at a movie studio because she did not have training in computer-generated animation.
C)Kirby is seeking a job as an airline pilot, but the high union wages in the industry have limited the number of jobs available.
D)Fatima lost her job at packing plant, but has not looked very intensively for a new job because she still has 2 months of unemployment insurance benefits left.

Question 24

When the real wage is above the level that equilibrates supply and demand:

A)the quantity of labor supplied exceeds the quantity demanded.
B)the quantity of labor demanded exceeds the quantity supplied.
C)there is no unemployment.
D)the labor market clears.

Question 25

All of the following policies were adopted by government in an attempt to reduce the natural rate of unemployment except:

A)unemployment insurance.
B)government employment agencies.
C)public retraining programs.
D)the Illinois bonus program for unemployment insurance claimants who found jobs quickly.

Question 26

The unemployment resulting from wage rigidity and job rationing is called unemployment.

A)frictional
B)structural
C)minimum-wage
D)insider

Question 27

Public policy to increase the job finding rate include and public policy to decrease the job separation rate include .

A)government employment agencies; higher unemployment insurance benefits
B)job training programs; 100 percent experience rated unemployment insurance
C)higher minimum wage laws; payment of unemployment benefits for longer periods
D)higher efficiency wages; partial experience rated unemployment insurance

Question 28

The unemployment resulting when real wages are held above equilibrium is called unemployment, while the unemployment that occurs as workers search for a job that best suits their skills is called unemployment.

A)efficiency; inefficiency
B)efficiency; structural
C)frictional; efficiency
D)structural; frictional

Question 29

Economists who have studied minimum-wage laws in the United States find that a 10 percent increase in the minimum wage increases teenage unemployment by about:

A)10 to 30 percent.
B)5 percent.
C)1 to 3 percent.
D)0 percent.

Question 30

If wage rigidity holds the real wage above the equilibrium level, an increase in the supply of labor will the number unemployed.

A)increase
B)decrease
C)not change
D)possibly increase, decrease, or leave unchanged

Question 31

The unemployment insurance system may be desirable because unemployment insurance:

A)raises the natural rate of unemployment.
B)reduces the rate of job finding.
C)increases workers' uncertainty about their incomes.
D)induces workers to reject unattractive job offers.

Question 32

According to studies of individual unemployed workers, these workers are most likely to find a job:

A)about three months before their unemployment insurance runs out.
B)within a few weeks of their unemployment insurance running out.
C)about three months after their unemployment insurance runs out.
D)at a time not influenced by the remaining number of weeks of unemployment insurance.

Question 33

When there is structural unemployment, the real wage is:

A)rigid at a level below the market-clearing level.
B)rigid at the market-clearing level.
C)rigid at a level above the market-clearing level.
D)flexible.

Question 34

Government policies directed at reducing frictional unemployment include:

A)abolishing minimum-wage laws.
B)making unemployment insurance 100 percent experience rated.
C)increasing the earned income credit.
D)making government part of the union-firm wage bargaining process.

Question 35

Workers unemployed as a result of wage rigidity are:

A)actively searching for a job to match their skills.
B)not eligible to receive unemployment insurance benefits.
C)waiting for a job to become available.
D)relocating to another part of the country as a result of sectoral shifts.

Question 36

Permitting a lower minimum wage for teenagers would likely:

A)raise teenage unemployment.
B)raise teenage wages overall.
C)prevent teenagers from getting job experience.
D)raise unemployment among unskilled adults.

Question 37

Firms currently have incentives to temporarily lay off workers because firms typically are charged for of workers' unemployment benefits.

A)all
B)only a part
C)none
D)twice the cost

Question 38

All of the following are causes of structural unemployment except:

A)minimum-wage laws.
B)the monopoly power of unions.
C)unemployment insurance.
D)efficiency wages.

Question 39

Most current unemployment-insurance programs are:

A)paid for fully by state governments.
B)paid for fully by the federal government.
C)100 percent experience rated.
D)partially experience rated.

Question 40

If wage rigidity holds the real wage above the equilibrium level, an increase in the demand for labor will the number unemployed.

A)increase
B)decrease
C)not change
D)possibly increase, decrease, or leave unchanged

Question 41

Suppose that over the course of a year 100 people are unemployed for 4 weeks each (the short-term unemployed), while 10 people are unemployed for 52 weeks each (the long-term unemployed). Approximately what percentage of the total weeks of unemployment were attributable to the long-term unemployed?

A)9 percent.
B)10 percent.
C)43.5 percent.
D)56.5 percent.

Question 42

Efficiency-wage theories suggest that a firm may pay workers more than the market-clearing wage for all of the following reasons except to:

A)reduce labor turnover.
B)improve the quality of the firm's labor force.
C)increase worker effort.
D)reduce the firm's wage bill.

Question 43

According to efficiency-wage theories, firms benefit by paying higher-than-equilibrium wages because worker increases.

A)productivity
B)turnover
C)unionization
D)shirking

Question 44

Paying efficiency wages helps firms reduce the problem of moral hazard by:

A)generating additional profits that can be used to improve working conditions.
B)keeping labor unions from organizing workers in the firm.
C)encouraging unsupervised workers to maintain a high level of productivity.
D)providing an incentive for the best-qualified workers to remain with the firm.

Question 45

Short-term unemployment is most likely to be unemployment while long-term unemployment is mostly to be unemployment.

A)structural; frictional
B)structural; the natural rate of
C)the natural rate of; frictional
D)frictional; structural

Question 46

When insiders have a much greater impact on the wage bargaining process than do outsiders, the negotiated wage is likely to be the equilibrium wage.

A)much greater than
B)much less than
C)almost equal to
D)about one-half of

Question 47

Unions contribute to structural unemployment when collective bargaining results in wages:

A)above the equilibrium level.
B)below the minimum wage.
C)below the equilibrium level.
D)above the level of unemployment compensation.

Question 48

The percentage of workers who belong to unions in the United States is approximately:

A)18 percent.
B)28 percent.
C)33 percent.
D)50 percent.

Question 49

One efficiency-wage theory implies that firms pay high wages because:

A)this practice increases the problem of moral hazard.
B)in wealthy countries, it is important to pay workers high wages to improve their health.
C)the more a firm pays its workers, the greater their incentive to stay with the firm.
D)paying high wages promotes adverse selection.

Question 50

Paying efficiency wages helps firms reduce the problem of adverse selection by:

A)generating additional profits that can be used to pay for more proficient hiring managers.
B)keeping labor unions from organizing workers in the firm.
C)encouraging unsupervised workers to maintain a high level of productivity.
D)providing an incentive for the best-qualified workers to remain with the firm.

Question 51

Suppose that over the course of a year 100 people are unemployed for 4 weeks each (the short-term unemployed), while 10 people are unemployed for 52 weeks each (the long-term unemployed). Approximately what percentage of the total spells of unemployment were attributable to the long-term unemployed?

A)9 percent.
B)10 percent.
C)43.5 percent.
D)56.5 percent.

Question 52

When Henry Ford paid his workers $5 per day when the prevailing wage was between $2 and $3 a day:

A)it greatly increased his company's costs.
B)workers reduced their work efforts because they felt they "had it made."
C)Ford proved the efficiency-wage theory was wrong.
D)it raised the efficiency of his workers.

Question 53

The earned income tax credit:

A)increases the government's tax revenue.
B)reduces the incomes of poor working families.
C)does not raise labor costs.
D)is not an alternative to raising the minimum wage.

Question 54

Centralized union wage bargaining with government intervention in Sweden gives relatively more influence to , while firm-level union wage bargaining in the United States gives relatively more influence to .

A)efficiency wages; sectoral shifts
B)sectoral shifts; efficiency wages
C)insiders; outsiders
D)outsiders; insiders

Question 55

When outsiders have a greater role than do insiders in the wage bargaining process, the negotiated wage is likely to be the equilibrium wage.

A)much greater than
B)much less than
C)much closer to
D)about twice

Question 56

In the case of unions, the conflict of interest between different groups of workers results in insiders wanting , while outsiders want .

A)more hirings; high wages
B)high wages; more hirings
C)high wages; fewer hirings
D)fewer hirings; high wages

Question 57

By paying efficiency wages, firms contribute to higher structural unemployment because they:

A)increase the wage bill.
B)make workers more productive.
C)keep the wage below the equilibrium level.
D)keep the wage above the equilibrium level.

Question 58

All of the following statements about minimum-wage workers in the United States are correct except:

A)Minimum-wage workers are more likely to be male.
B)Minimum-wage workers are more likely to work part time.
C)Minimum-wage workers are more likely to be less educated.
D)Minimum-wage workers are more likely to be young.

Question 59

Most spells of unemployment are term and most weeks of unemployment are attributable to -term unemployment.

A)short; short
B)short; long
C)long; long
D)long; short

Question 60

Policies to substantially reduce unemployment should be targeted at:

A)the short-term unemployed.
B)the long-term unemployed
C)discouraged workers.
D)insiders and outsiders.

Question 61

During the past 50-plus years the natural rate of unemployment in the United States during the 1970s and 1980s, compared to the 1950s and 1960s, and then during the 1990s, compared to the previous two decades.

A)increased; increased
B)increased; decreased
C)decreased; decreased
D)decreased; increased

Question 62

Differences in unemployment rates across demographic groups is most closely correlated with differences in:

A)job finding rates.
B)job separation rates.
C)unionization rates.
D)efficiency wage rates.

Question 63

Discouraged workers are individuals who:

A)have jobs that do not match their skills (e.g., a Ph.D. driving a taxi cab).
B)have been unemployed for more than 26 weeks.
C)call themselves unemployed but are not seriously looking for a job.
D)want a job but have given up looking for one.

Question 64

The demographic explanation for the changes in the U.S. natural rate of unemployment over the past 50 years rests on the idea that:

A)younger workers have higher rates of unemployment.
B)younger workers have lower rates of unemployment.
C)baby-boom workers were more productive than other workers because they had greater access to technology.
D)baby-boom workers had higher than usual rates of job finding.

Question 65

As the relative demand for unskilled workers falls, wages for unskilled workers and unemployment compensation becomes a attractive option.

A)fall; more
B)fall; less
C)rise; more
D)rise; less

Question 66

Which of the following rankings (from most severe to least severe) best captures the degree of hardship associated with various types of unemployment?

A)discouraged worker, short term, long term
B)involuntarily part-time, job leavers, job losers
C)job losers, job leavers, marginally attached
D)job leavers, involuntary part-time, discouraged workers

Question 67

Spells of unemployment end when the unemployed person finds a job or:

A)withdraws from the labor force.
B)enters the labor force.
C)runs out of unemployment insurance compensation.
D)refuses to Answer unemployment survey questions.

Question 68

In 2009 in the United States among labor-force members ages 16-19, the highest unemployment rate was for:

A)black females.
B)black males.
C)white females.
D)white males.

Question 69

All of the following are possible explanations for the trends in the U.S. unemployment rate in the last half of the twentieth century and early twenty-first century except:

A)the changing composition of the U.S. workforce.
B)sectoral shifts.
C)a generally increasing real value of the minimum wage.
D)the links between unemployment and productivity.

Question 70

The recent reduced demand for unskilled workers relative to skilled workers has led to for unskilled workers in Europe compared to for unskilled workers in the
United States.

A)unemployment; lower wages
B)lower wages; unemployment
C)more unionization; efficiency wages
D)efficiency wages; more unionization

Question 71

Many economists attribute part of the recent increase in European unemployment to:

A)high birthrates.
B)slow rates of technological change.
C)generous benefits for unemployed workers.
D)increased demand for unskilled workers.

Question 72

Compared with an employed white teenage male, an employed middle-aged white male is likely to become unemployed and, once unemployed, is likely to find a job.

A)less; more
B)less; just as
C)more; less
D)just as; more

Question 73

The sectoral shifts explanation for changes in the U.S. natural rate of unemployment over the past 50 years rests on the idea that oil-price volatility the rate of job .

A)increased; separation
B)decreased; separation
C)increased; findings
D)decreased; findings

Question 74

Discouraged workers are counted as:

A)part of the labor force.
B)out of the labor force.
C)employed.
D)unemployed.

Question 75

Transitions into and out of the labor force:

A)rarely occur.
B)do not affect unemployment statistics.
C)make unemployment statistics difficult to interpret.
D)reduce the amount of frictional unemployment.

Question 76

Data on unemployment in the United States show that:

A)most spells of unemployment are long.
B)most weeks of unemployment are attributable to the long-term unemployed.
C)members of the labor force over age 55 have the highest unemployment rates.
D)the average unemployment rate for the United States was lower in the 1980s than in the 1970s.

Question 77

Entry into and exit from the labor force are important to the determination of the unemployment rate because:

A)more than one-half of the unemployed have only recently entered the labor force.
B)most of the unemployed are young workers still looking for their first job.
C)discouraged workers are counted as part of the labor force.
D)almost one-half of all spells of unemployment end in the unemployed person's withdrawal from the labor market.

Question 78

A spell of unemployment begins when a person leaves his or her job or:

A)withdraws from the labor force.
B)enters the labor force.
C)takes a vacation.
D)has been without a job for at least four weeks.

Question 79

During the period from 1990 to 2006, in the United States, most spells of unemployment lasted:

A)less than one month, yet most of the weeks of unemployment occurred in spells lasting two or more months.
B)more than one month, and most weeks of unemployment occurred in spells of two or more months.
C)less than one month, and most weeks of unemployment occurred in spells of one month or less.
D)more than one month, but most weeks of unemployment occurred in spells of one month or less.

Question 80

Unemployment would decline in the face of rising productivity if:

A)real wages only increased sluggishly.
B)real wages adjusted instantaneously.
C)labor supply remained fixed in the face of increases in labor demand.
D)the demand for labor did not respond to the rising productivity.