Deck 14: Unemployment

Question 1

A construction worker who is not working due to a snow storm would be counted as ________ unemployed.

A) frictionally
B) structurally
C) cyclically
D) seasonally

Answer 1

D

Question 2

Paying efficiency wages to reduce turnover may be profit-maximizing for companies, but it also contributes to ________ unemployment.

A) frictional
B) regional
C) cyclical
D) structural

Answer 2

D

Question 3

A worker who has quit one job to have time to search for a similar position is counted as what type of unemployment?

A) frictional
B) occupational
C) regional
D) cyclical

Answer 3

A

Question 4

The stock of unemployed workers at any given time consists mostly of

A) people who have short spells of unemployment.
B) people who have long spells of unemployment.
C) people who have been laid off from one employer and become employed by another.
D) people who have searched for jobs, but who have become discouraged.

Question 5

Advance notice of lay-offs should help to reduce

A) frictional unemployment.
B) structural unemployment.
C) cyclical unemployment and frictional unemployment.
D) frictional unemployment and structural unemployment.

Question 6

Experience rating is

A) assigning a higher UI tax to employers who lay off workers frequently.
B) assigning a higher UI tax to employers who have a large number of experienced workers.
C) assigning a higher UI tax to employers who have a large number of inexperienced workers.
D) assigning a higher UI tax to employers who have not been in business for very long, because these businesses are likely to fail.

Question 7

Most workers who are laid off

A) return to work with the same employer.
B) find work with another employer.
C) stay unemployed for a relatively long duration.
D) drop out of the labor force.

Question 8

A worker who is laid off because his or her company chooses to move from Wisconsin to North Carolina is counted as ________ unemployment.

A) frictional
B) wait
C) structural
D) cyclical

Question 9

Wait unemployment is a form of ________ unemployment.

A) structural
B) frictional
C) cyclical
D) structural and cyclical

Question 10

A retraining program to teach unemployed auto workers how to program computers would help to reduce ________ unemployment.

A) frictional
B) cyclical
C) seasonal
D) structural

Question 11

The natural rate of unemployment

A) is currently about 4%.
B) must be the same for every demographic group.
C) occurs when job vacancies equal the number of unemployed workers.
D) hit bottom in the 1970s.

Question 12

The unemployment rate tells us

A) the percentage of the population that is not working.
B) the percentage of the population that is searching for work.
C) the percentage of the labor force that has been laid off.
D) the percentage of the labor force that is not working.

Question 13

Which of the following does NOT explain why firms and employees may prefer layoffs to wage reductions?

A) Employees may possess firm-specific training.
B) Employees may possess general training.
C) Firms may have implicitly promised a wage path to their employees.
D) Experienced workers may prefer a certain income stream to an uncertain income stream.

Question 14

Which of these is NOT an implication of the model of job search?

A) Virtually all individuals will be underemployed.
B) Workers with identical skill levels will generally receive different wages if their reservation wages differ.
C) If the cost of being unemployed falls, a person's reservation wage will fall.
D) Search unemployment is a rational strategy in a world of imperfect information.

Question 15

The largest source of unemployed workers is ________ and the second largest is ________.

A) job losers; new entrants
B) job losers; reentrants
C) job leavers; new entrants
D) job leavers; reentrants

Question 16

If the unemployment rate increases

A) the employment rate must decrease.
B) the employment rate must increase.
C) the employment rate will generally decrease by the same amount.
D) the employment rate may either increase or decrease.

Question 17

European policies which make it difficult to dismiss workers and reduce wage flexibility have probably

A) increased the rate of job creation.
B) decreased the unemployment rate.
C) decreased the rate of long-term unemployment.
D) increased the costs of doing business.

Question 18

A reservation wage is

A) the lowest wage a worker will accept.
B) the lowest wage a company will offer.
C) the highest wage a company will offer.
D) the wage at which a company's profits are maximized.

Question 19

If unemployment insurance were perfectly experience rated then

A) unemployment would probably rise.
B) unemployment would probably fall.
C) unemployment could either rise or fall.
D) unemployment would be unchanged.

Question 20

An increase in an individual's reservation wage

A) will increase the duration of the individual's unemployment but not affect the expected wage.
B) will increase the individual's expected wage but not affect the duration of unemployment.
C) will not change the individual's duration of unemployment.
D) will increase both the individual's duration of unemployment and expected wage.

Question 21

A research observes that more generous unemployment benefits results in a greater duration of unemployment and a great improvement in job matches. This suggests that more generous benefits

A) makes job searchers more selective in the jobs they accept.
B) makes job searchers increase the intensity of search by searching more opening per period.
C) both A and B.
D) neither A nor B.

Question 22

Unemployment insurance in the United States is structured so that

A) replacement rates are constant.
B) almost all unemployed workers can collect UI benefits.
C) UI benefits are partially linked to previous pay.
D) UI benefits may be collected for one year after the job loss.

Question 23

In the face of declining demand, unions usually tend to favor laying off workers rather than lowering wages. Which of these factors would not explain why this occurs?

A) Workers with less seniority are laid off first.
B) Union leaders are elected by majority vote.
C) Lay-offs usually only affect a small fraction of the work force.
D) Most union members are willing to lose their jobs rather than accept even a small cut in wages.

Question 24

Unemployment tends to go up when aggregate demand falls mainly because

A) when wages fall, workers seek alternative employment.
B) unions renegotiate for lower wages, making it difficult for job searchers to find suitable jobs.
C) wage rates then to be downward rigid.
D) most human capital is general and not firm-specific.

Question 25

If all employers pay an efficiency wage, then, comparing average wages and unemployment rates across areas, and if workers in areas with low unemployment rate can easily find alternative jobs, one would expect

A) average wages to be directly (positively) related to unemployment rates.
B) average wages times one minus the unemployment rate to be the same across areas.
C) the duration of unemployment, but not necessarily the rate, to be inversely related to the average wage.
D) average wages will be higher in areas with low unemployment rates.

Question 26

In claimant bonus experiments, bonuses to workers ________ the average duration of unemployment, and bonuses to employers ________ the average duration of unemployment.

A) increased; did not change
B) decreased; did not change
C) did not change; increased
D) did not change; decreased

Question 27

If all employers pay an efficiency wage, then

A) more employees would shirk.
B) unemployment would be higher.
C) firms would be better able to monitor their employees productivity.
D) all of the above

Question 28

Theoretically, existence of generous unemployment insurance will

A) reduce the unemployment rate.
B) reduce reservation wages.
C) improve job matches.
D) increase income inequality.

Question 29

If workers for a firm have mainly general human capital, then when the demand for its output falls, the firm will mainly

A) lower wages.
B) cut back on employment.
C) cut work hours of all workers.
D) increase its specific investment in workers as the opportunity cost of training is low.

Question 30

Which of the following describes the wage curve?

A) Workers with higher wages are less likely to become unemployed.
B) Regions with higher wages have lower regional unemployment rates.
C) As more workers seek jobs, market wages fall.
D) As regional wages increase, the number of persons seeking jobs goes up.

Question 31

A nation has full employment when

A) wages and prices are stable.
B) unemployment is at its lowest level.
C) unemployment rates are the same across all demographic groups.
D) workers are earning a living wage.

Question 32

If all employers pay an efficiency wage, then which of the following will increase the unemployment rate, other things the same?

A) it becomes less costly to monitor workers productivity
B) firms due to a mistake reduce their wages
C) the cost to the firm of workers shirking goes up
D) workers put a lower value on shirking

Question 33

If Ajax Incorporated is a very unstable employer that frequently lays off workers, it will prefer to locate its plants in states

A) with perfect experience rating of unemployment insurance tax rates.
B) with imperfect experience rating such that once its layoffs increase beyond a certain level, it does not have to pay a higher unemployment insurance tax rate.
C) with imperfect experience ratings such that once its layoffs fall below a certain level, it pays the same minimum unemployment insurance tax rate.
D) with imperfect experience ratings such that above a certain level, the unemployment tax rate increases more than in proportion to layoffs.

Question 34

The wage curve

A) shows that with higher regional rates of unemployment, wages for otherwise comparable workers are higher.
B) is evidence that most national economies have regionally integrated labor markets.
C) may exist because efficiency-wage premiums can be smaller in areas of high unemployment.
D) is evidence that wages are always at equilibrium.

Question 35

Suppose that no one enters or leaves the labor force and that the fraction of the unemployed getting a job (in a given period) is 0.10 and the fraction of the employment becoming unemployed is 0.02. What is the approximate unemployment rate when the flows into and out of unemployed are in balance?

A) 9%
B) 10%
C) 17%
D) 22%