Deck 9: Unemployment and Inflation

Question 1

Based in part on the aftermath of the financial crisis that began in 2008 and the speed of the recovery of the U.S.economy following the recession of 2007-2009,Bank of America ________ the number of persons it employed in September 2011 and this ________ the total number of persons unemployed in the economy.

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

Answer 1

decreased; increased

Question 2

The Bureau of Labor Statistics would categorize a retiree who is not working as

A) employed.
B) unemployed.
C) a discouraged worker.
D) out of the labor force.

Answer 2

out of the labor force.

Question 3

Someone who is available for work but has not actively looked for work in the previous four weeks would be classified as

A) employed.
B) unemployed.
C) not in the labor force.
D) not in the working-age population.

Answer 3

not in the labor force.

Question 4

The unemployment rate is an important economic statistic that can tell us about the health of the economy.If the unemployment rate turns out to be high or higher than anticipated,we would expect

A) it is more likely that an incumbent president will be re-elected.
B) that stock prices are more likely to fall.
C) that jobs are less difficult to find.
D) that investors will be more optimistic about the economy.

Question 5

If the BLS counted persons that are on active military service in the totals for employment,the labor force,or the working-age population,this would

A) decrease the measured unemployment rate.
B) decrease the measured labor force participation rate.
C) decrease the number of persons in the labor force.
D) decrease the number of persons in the working-age population.

Question 6

The economy has gone into a recession.You have majored in computer science and,because of the recession,have difficulty in finding a job.Should you go back to school and get a second major?

A) Yes, the recession will ensure that you will never find a job as a programmer.
B) Yes, the recession will lower income in my field permanently.
C) No, the recession will most likely be short-lived and I can get a job after it is over.
D) No, the recession will have no impact on my ability to get a job or my future income.

Question 7

The Bureau of Labor Statistics would categorize a person as ________ if they were temporarily away from their job because they were ill.

A) employed
B) unemployed
C) a discouraged worker
D) out of the labor force

Question 8

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to understate the true extent of joblessness?

A) inflation
B) discouraged workers
C) people employed in the underground economy
D) unemployed persons falsely report themselves to be actively looking for a job

Question 9

Suppose the government launches a successful advertising campaign that convinces workers with high school degrees to quit their jobs and become full time college students.This would cause

A) the unemployment rate to decrease.
B) the labor force participation rate to decrease.
C) the number of discouraged workers to increase.
D) no change in the unemployment rate.

Question 10

Table 20-1

Consider the data above for a simple economy.
Refer to Table 20-1.The labor force participation rate for this simple economy equals

A) (1,000/1,100) × 100.
B) (1,000/15,000) × 100.
C) (1,100/15,000) × 100.
D) (1,100/20,000) × 100.

Question 11

Suppose that homemakers are included as employed in the labor force statistics,rather than being counted as out of the labor force.This would

A) increase the measured unemployment rate.
B) increase the measured labor force participation rate.
C) decrease the number of persons in the labor force.
D) decrease the number of persons in the working-age population.

Question 12

The labor force equals the number of people

A) employed.
B) unemployed.
C) employed plus unemployed.
D) in the working-age population.

Question 13

Which of the following explains the changes in the U.S.adult male labor force participation rate since 1948?

A) more men are joining the military as compared to the past
B) more men are retiring later in life as compared to the past
C) fewer men consider themselves discouraged workers as compared to the past
D) younger men are remaining in school longer as compared to the past

Question 14

Suppose the working-age population of a fictional economy falls into the following categories: 90 are retired or homemakers; 60 have full-time employment; 20 have part-time employment; 20 do not have employment,but are actively looking for employment; and 10 would like employment but do not have employment and are not actively looking for employment.The official unemployment rate as calculated by the U.S.Bureau of Labor would equal

A) (20/60) × 100.
B) (20/80) × 100.
C) (30/80) × 100.
D) (20/100) × 100.

Question 15

Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics to overstate the true extent of joblessness?

A) inflation
B) discouraged workers
C) counting people as employed who are working part time, although they would prefer to be working full time
D) unemployed persons falsely report themselves to be actively looking for a job

Question 16

The labor force participation rate equals the

A) (number of employed divided by the labor force) × 100.
B) (labor force divided by the number of people not in the labor force) × 100.
C) (labor force divided by working-age population) × 100.
D) (labor force divided by the total population) × 100.

Question 17

Suppose the labor force stays constant,and the working-age population stays constant,but a greater number of persons who were unemployed become employed.The labor force participation rate will

A) increase.
B) decrease.
C) remain constant.
D) not change in a way that can be predicted.

Question 18

The unemployment rate equals the number of unemployed divided by the ________,all times 100.

A) number of employed
B) labor force
C) working-age population
D) total population

Question 19

Table 20-1

Consider the data above for a simple economy.
Refer to Table 20-1.The unemployment rate for this simple economy equals

A) (100/1,000) × 100.
B) (100/1,100) × 100.
C) (100/15,000) × 100.
D) (100/20,000) × 100.

Question 20

Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?

A) unemployment rate
B) discouraged-worker ratio
C) labor force participation rate
D) the ratio of minimum wage to inflation

Question 21

Fill in the missing values in the table of data collected in the household survey for November,2009.The working-age population,employment,unemployment,and labor force are measured in thousands.Show your work.

Question 22

An advantage of the household survey over the establishment survey of the labor market is that the household survey

A) is based on actual payrolls, rather than on unverified answers.
B) includes the number of self-employed persons.
C) includes the number of discouraged workers.
D) omits persons employed at newly opened firms.

Question 23

A student who just graduated from college but has not found a job would most likely be

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

Question 24

The Bureau of Labor Statistics does not count discouraged workers as unemployed.Suppose discouraged workers were counted as unemployed.Explain how the unemployment rate and the labor force participation rate would change.

Question 25

Using a broader measure of the unemployment rate where discouraged workers and part-time workers who wished to work full time were counted as unemployed,the BLS estimates the unemployment rate in September 2011 would have ________ compared to the measured unemployment rate.

A) increased by more that 7 percentage points
B) more than doubled
C) decreased by less than 1 percentage point
D) barely changed

Question 26

An advantage of the establishment survey over the household survey of the labor market is that the establishment survey

A) is based on actual payrolls, rather than on unverified answers.
B) includes the number of self-employed persons.
C) includes persons employed at newly opened firms.
D) provides an estimate of the number of persons unemployed.

Question 27

Cyclical unemployment is the result of

A) a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs.
B) the search process of matching workers with jobs.
C) the ups and downs in inflation.
D) a slowdown in the economy.

Question 28

In the United States,the typical person who has lost his or her job finds another one in a few months except during severe recessions.

Question 29

The labor force participation rates of women have rapidly increased since 1948.

Question 30

Which of the following statements is true about the U.S.economy?

A) Each year, many new jobs are created, but few existing jobs are destroyed, and the unemployed find jobs quickly.
B) Each year, few new jobs are created, but few existing jobs are destroyed, keeping unemployment low.
C) Each year, many new jobs are created and many existing jobs are destroyed.
D) Each year few jobs are created, and therefore it takes the unemployed a long time to find a new job.

Question 31

The Bureau of Labor Statistics counts as employed people who work part-time,but would prefer to work full-time.Suppose the people who had part-time jobs,but wanted full-time jobs,were counted as unemployed.Explain how the unemployment rate and the labor force participation rate would change.

Question 32

In the modern U.S.economy,the typical unemployed person stays unemployed for

A) a relatively long time, over a year.
B) a relatively short time, less than six months.
C) for a long time during expansions and short time during recessions.
D) an amount of time that is hard to quantify.

Question 33

The advice to "keep searching,there are plenty of jobs around here for which you are qualified",would be most appropriate for which of the following types of unemployment?

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

Question 34

After the recession of 2007-2009,the unemployment rate peaked at 10.1 percent in October 2009.23 months later,it had

A) dropped by 50 percent.
B) declined by only 1 percentage point.
C) remained at 10.1 percent.
D) fallen to the natural rate of unemployment.

Question 35

Frictional unemployment is the result of

A) a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs.
B) the search process of matching workers with jobs.
C) the ups and downs in inflation.
D) a slowdown in the economy.

Question 36

Fill in the missing values in the table of data collected in the household survey for December,1996.The working-age population,employment,unemployment,and labor force are measured in thousands.Show your work.

Question 37

Counting part-time workers who are looking for full-time work as employed overstates the degree of joblessness in the economy.

Question 38

Since 1948,the labor force participation rate for adult men has ________ and for adult women has ________.

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

Question 39

The average period of unemployment was ________ following the 2007-2009 recession as following any other recession since the end of World War II.

A) three times as low
B) approximately the same
C) twice as high
D) eight times as high

Question 40

Structural unemployment is the result of

A) a persistent mismatch between the skills and characteristics of workers and the requirements of the jobs.
B) the search process of matching workers with jobs.
C) the ups and downs in inflation.
D) a slowdown in the economy.

Question 41

According to the text,economists consider full employment to occur when

A) everyone who wants a job has a job.
B) frictional unemployment equals zero.
C) the sum of frictional unemployment and structural unemployment equals zero.
D) the unemployment rate consists of only frictional and structural unemployment.

Question 42

Which of the following would decrease the unemployment rate?

A) an increase in the minimum wage
B) an increase in the efficiency wage
C) an increase in labor union membership
D) government aid to retrain unemployed workers

Question 43

The reasons why someone cannot get a job are similar to the reasons why someone cannot get a date.Using the ideas of frictionally unemployed,structurally unemployed,and cyclically unemployed,describe and explain how a student at your university might be frictionally "undated," structurally "undated," and cyclically "undated."

Question 44

Eliminating frictional unemployment would be good for the economy.

Question 45

The advice to "retrain" would be most appropriate for which of the following types of unemployment?

A) frictional unemployment
B) structural unemployment
C) cyclical unemployment
D) core unemployment

Question 46

An increase in unemployment insurance payments would,in effect,________ the amount of time spent searching for a job,which would increase ________ unemployment.

A) increase; cyclical
B) increase; frictional
C) decrease; cyclical
D) decrease; frictional

Question 47

If cyclical unemployment is eliminated in the economy,then

A) the economy is considered to be at full employment.
B) the unemployment rate is below the natural rate of unemployment.
C) the unemployment rate is above the natural rate of unemployment.
D) the economy is at less than full employment.

Question 48

Unemployment caused by a business cycle recession is called cyclical unemployment.

Question 49

The natural rate of unemployment consists of frictional unemployment plus structural unemployment.

Question 50

To understand why someone cannot get a job,it helps to know the three types of unemployment.List the three types of unemployment and explain what causes each type.What advice for finding a job would be appropriate for someone in each type of unemployment?

Question 51

If you have trouble finding a job because of a slowdown in the overall economy,we would say that you are

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

Question 52

Most of the unemployment that occurred during the Great Depression was

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

Question 53

In September 2011,Bank of America laid off 30,000 employees.The laid-off employees who were not able to find jobs at another bank due to a permanent decline in business in the financial industry would be considered

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

Question 54

During the Great Depression,cyclical unemployment increased as the recession continued.This increase in cyclical unemployment

A) increased the natural rate of unemployment.
B) decreased the natural rate of unemployment.
C) had no effect on the natural rate of unemployment.
D) could have increased or decreased the natural rate of unemployment.

Question 55

Full employment is not considered to be zero unemployment,because

A) some cyclical unemployment always exists.
B) some people do not want a job.
C) there are not enough jobs for everyone who wants one.
D) people do not find jobs instantaneously.

Question 56

Which of the following would increase the unemployment rate?

A) a law making it illegal to work more than 35 hours per week
B) a cut in unemployment compensation
C) an increase in unemployment insurance payments
D) a decrease in the minimum wage

Question 57

A central concept in macroeconomics is the idea of the natural rate of unemployment.Why does it make sense to define full employment to occur when the unemployment rate equals the natural rate of unemployment,instead of when the unemployment rate equals zero? Elaborate and explain carefully.

Question 58

If the federal government implements programs so that the unemployed are more quickly matched with jobs,then

A) the natural rate of unemployment will increase.
B) the natural rate of unemployment will decrease.
C) the natural rate of unemployment will not change.
D) the natural rate of unemployment could either increase or decrease.

Question 59

A lumberjack loses his job because timber cutting restrictions were imposed by the EPA to protect the spotted owl habitat.This lumberjack would be

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

Question 60

The natural rate of unemployment is the amount of unemployment

A) associated with the business cycle.
B) equal to frictional plus structural unemployment.
C) that exists when the economy goes into recession.
D) that exists when the economy is in an expansion.

Question 61

Efficiency wage is another name for the minimum wage.

Question 62

Suppose that the labor movement has a revival in the United States and the majority of workers join labor unions.As a result we would expect

A) the labor force participation rate to fall.
B) the unemployment rate to fall.
C) the unemployment rate to rise.
D) no change in the unemployment rate or labor force participation rate.

Question 63

The increased generosity of unemployment insurance programs in Canada as compared to the United States should

A) decrease the duration of unemployment in Canada as compared to the United States.
B) increase the duration of unemployment in Canada as compared to the United States.
C) have no impact on the duration of unemployment in Canada.
D) raise the duration of unemployment in the United States.

Question 64

If the minimum wage is set above the market wage,

A) the quantity of labor supplied will be below the quantity of labor demanded.
B) unemployment will rise.
C) highly-skilled workers will have a harder time finding jobs.
D) All of the above are correct.

Question 65

Which of the following is true about the consumer price index?

A) It accounts for people switching to goods whose prices have fallen.
B) It assumes that consumers purchase the same amount of each product in the market basket each month.
C) It frequently updates the price changes of new products added to the market basket, as these have a tendency to fall.
D) It filters out the part of price increases that occurs because of quality improvements in products.

Question 66

Discuss the likely impact of each of the following on the unemployment rate:
a.The length of time workers are eligible to receive unemployment insurance payments is cut in half.
b.The government passes a law making labor unions illegal.
c.The minimum wage is raised by 50 percent.
d.The government funds an Internet site where companies can post job openings at no charge.

Question 67

Which of the following price indices comes closest to measuring the cost of living of the typical household?

A) GDP deflator
B) producer price index
C) consumer price index
D) household price index

Question 68

Which of the following policies would reduce structural unemployment?

A) an increase in the minimum wage
B) a job retraining program
C) implementing an unemployment insurance policy
D) building an on-line job database that helps workers find jobs

Question 69

Efficiency wages cause unemployment because

A) firms pay wages that are below the market wage, causing the quantity of labor demanded to be greater than the quantity of labor supplied.
B) firms pay wages that are below the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied.
C) firms pay wages that are above the market wage, causing the quantity of labor demanded to be greater than the quantity of labor supplied.
D) firms pay wages that are above the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied.

Question 70

Which of the following would be the best measure of the cost of living?

A) real GDP
B) real GDP per person
C) GDP deflator
D) consumer price index

Question 71

The United States has ________ social insurance programs,and generally has a ________ unemployment rate,as compared to Canada and Western Europe.

A) less generous; lower
B) less generous; greater
C) more generous; lower
D) more generous; greater

Question 72

The unemployment rate in the United States is typically lower than in Western Europe because the United States has tougher requirements for the unemployed to receive government payments.

Question 73

Minimum wage laws cause unemployment because the legal minimum wage is set

A) below the market wage, causing labor demand to be greater than labor supply.
B) below the market wage, causing labor demand to be less than labor supply.
C) above the market wage, causing labor demand to be greater than labor supply.
D) above the market wage, causing labor demand to be less than labor supply.
E) too low.

Question 74

If the price level rose in three consecutive years from 100 to 120 to 140,then the annual inflation rate over those years would

A) increase.
B) remain the same.
C) decrease.
D) equal 20%.

Question 75

The average price of goods and services in the economy is also known as

A) the price level.
B) the inflation rate.
C) a market basket.
D) the cost of living.

Question 76

Most economists believe that labor unions significantly increase the overall unemployment rate in the United States.

Question 77

What are some reasons why the unemployment rate is typically lower in the United States as compared to Canada and some Western European countries?

Question 78

An unemployment insurance program has which of the following effects?

A) It decreases the amount of personal income of the unemployed.
B) It contributes to the severity of a recession or economic downturn.
C) It increases the amount of time spent searching for a job.
D) It lowers the overall unemployment rate.

Question 79

Which of the following policies would reduce frictional unemployment?

A) a decrease in the minimum wage
B) a job retraining program
C) implementing an unemployment insurance policy
D) building an on-line job database that helps workers find jobs

Question 80

If firms pay what are called "efficiency wages," they pay wages that

A) motivate workers to increase their productivity.
B) are lower than average to ensure maximum profit.
C) will eventually lower the unemployment rate.
D) are mandated by the government.