Deck 9: Unemployment and Inflation

Question 1

The labor force participation rate is defined as

A) the percentage of the working-age population that is employed.
B) the percentage of the working-age population that is unemployed.
C) the percentage of the labor force that is employed.
D) the percentage of the labor force that is unemployed.
E) the percentage of the working-age population in the labor force.

Answer 1

the percentage of the working-age population in the labor force.

Question 2

Except for recessions,the duration of unemployment for the typical person lasts

A) less than six months.
B) six to nine months.
C) over nine months.
D) over one year.
E) over five years.

Answer 2

less than six months.

Question 3

In September 2011,Bank of America announced it would be laying off 30,000 employees,an indication of how slowly the U.S.economy was recovering from the recession of 2007-2009.At this time,economists at the White House and the Federal Reserve were forecasting that unemployment

A) was beginning to fall back to its pre-recession levels.
B) would continue to rise for the next 5 years.
C) would not return to more normal levels for at least another two years.
D) had peaked and would decrease by 50 percent by the end of 2012.

Answer 3

would not return to more normal levels for at least another two years.

Question 4

The unemployment rate is

A) the percentage of the labor force that is employed.
B) the percentage of the number employed that is unemployed.
C) the percentage of the working-age population that is unemployed.
D) the percentage of the labor force that is unemployed.
E) the percentage of the working-age population that is employed.

Question 5

During the month of May,10 million workers moved from being classified as "unemployed" to being classified as "employed." As a result,

A) the unemployment rate rose.
B) the labor force participation rate fell.
C) the unemployment rate fell.
D) the labor force participation rate rose.

Question 6

Which of the following causes the unemployment rate to understate the true extent of joblessness?

A) Many full time workers really want to be part time workers.
B) Persons who collect unemployment benefits report themselves to be searching for a job.
C) Discouraged workers are not counted as unemployed.
D) A drug dealer reports herself as unemployed.
E) Discouraged workers are counted as unemployed.

Question 7

If the number of unemployed workers is 19 million,the number in the working-age population is 500 million,and the unemployment rate is 4%,what is the labor force participation rate?

A) 4.75%
B) 7.8%
C) 95%
D) 96.2%

Question 8

If the number of unemployed workers is 200 million,the number of employed workers is 300 million,and the working-age population is 800 million,what is the labor force participation rate?

A) 12.5%
B) 37.5%
C) 40%
D) 62.5%

Question 9

Jack lost his job six months ago,and he's been actively looking for a new job ever since.The Bureau of Labor Statistics would classify Jack as

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

Question 10

A full-time student who is not working is categorized as

A) unemployed.
B) employed.
C) not in the labor force.
D) a discouraged worker.
E) frictionally unemployed.

Question 11

Discouraged workers are classified by the BLS as

A) part of the labor force.
B) out of the labor force.
C) unemployed.
D) employed.
E) part-time employees.

Question 12

The labor force is the sum of

A) employed workers and discouraged workers.
B) employed workers and unemployed workers.
C) employed workers and individuals not looking for work.
D) employed workers and the working age population.
E) unemployed workers and the working age population.

Question 13

In September 2011,the U.S.unemployment rate was highest for

A) whites.
B) Hispanics.
C) high school dropouts.
D) African-Americans.
E) Asians.

Question 14

If the number employed is 190 million,the working-age population is 230 million,and the number unemployed is 10 million,then the unemployment rate is

A) 5%.
B) 5.2%.
C) 8%.
D) 10%.
E) 50%.

Question 15

Mike has been unemployed for over a year.He hasn't looked for a job in the last three months,but he's just started looking for work again.Because Mike started looking for a new job,

A) the unemployment rate increased.
B) the labor force participation rate decreased.
C) the unemployment rate decreased.
D) the working-age population increased.

Question 16

Upon your graduation from college,you find that the economy is in recession and the unemployment rate is relatively high.Nonetheless,you continue along your career path looking for a new job because

A) the cost of additional education is always higher during recession.
B) high unemployment rates do not usually last for very long.
C) looking for work is your only option.
D) the wages of college graduates do not fall during recession.

Question 17

Which of the following would reduce the labor force participation rate,all else equal?

A) an increase in the number of people in the labor force
B) an increase in the unemployment rate
C) a decrease in the unemployment rate
D) an increase in the working-age population

Question 18

If the number employed is 190 million,the number unemployed is 10 million,and the working-age population is 250 million,then the labor force participation rate is

A) 4%.
B) 5.2%.
C) 60%.
D) 76%.
E) 80%.

Question 19

If the number of unemployed workers is 200 million,and the number in the labor force is 500 million,what is the unemployment rate?

A) 0.4%
B) 4%
C) 14%
D) 40%

Question 20

Discouraged workers are

A) workers who have a part time job but want a full time job.
B) workers who find their current jobs unfulfilling and are considering a job change.
C) workers who have consistently been looking for work for more than 4 weeks.
D) workers who have stopped looking for work because they believe there are no jobs for them.

Question 21

People who lost their jobs as hand-drawn animators because of the popularity of computer-generated 3D animation are examples of persons who are suffering

A) frictional unemployment.
B) structural unemployment.
C) cyclical unemployment.
D) seasonal unemployment.
E) unnatural unemployment.

Question 22

The labor force participation rates of men have gradually increased since 1948.

Question 23

Workers laid off as a result of a recession suffer

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

Question 24

Which of the following describes actual trends in the U.S.labor force participation rate?

A) The labor force participation rate of adult men has risen since 1950.
B) The labor force participation rate of adult women has fallen since 1950.
C) The labor force participation rate of adult men not in school, but too young to retire has risen since 1950.
D) The labor force participation rate of adult women has risen since 1950.
E) The labor force participation rate of all adults has fallen since 1950.

Question 25

In recent years,economists have come to rely more on the establishment survey rather than the household survey to analyze current labor market statistics.

Question 26

The short-term unemployment arising from the process of matching workers with jobs is called

A) frictional unemployment.
B) structural unemployment.
C) cyclical unemployment.
D) seasonal unemployment.
E) unnatural unemployment.

Question 27

How could a growing labor force lead to an increase in the unemployment rate?

Question 28

Suppose 180,000 people are employed,20,000 people are unemployed,and 50,000 people are out of the labor force,then calculate the labor force participation rate.

Question 29

Following the end of the recession of 2007-2009,the employment-population ratio

A) remained virtually unchanged for the next 36 months.
B) continued to decline for the next two years.
C) began to slowly increase back to its pre-recession level.
D) began to quickly increase back to its pre-recession level.

Question 30

Jack just received a promotion at work and now works 50 hours per week instead of 35.As a result,

A) the unemployment rate increased.
B) the unemployment rate decreased.
C) the labor force participation rate increased.
D) neither the unemployment rate nor the labor force participation rate changed.

Question 31

Which of the following is an example of a worker experiencing cyclical unemployment?

A) A worker that changes jobs to move closer her family.
B) An assembly line worker who loses his job because of automation.
C) A freightliner employee that got laid off because of the recession of 2007-2009.
D) A lifeguard who was hired during the summer season is laid off after summer is over.
E) A worker quits his job because he does not get along with his boss.

Question 32

The household survey is compiled from firms who answer questions about the number of persons who are employed and on the company payroll.

Question 33

Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of jobs is called

A) frictional unemployment.
B) structural unemployment.
C) cyclical unemployment.
D) seasonal unemployment.
E) unnatural unemployment.

Question 34

How would the unemployment rate and the labor force participation rate change if discouraged workers were counted as unemployed rather than counted as out of the labor force? Show using the formula for both measurements.

Question 35

Suppose 180,000 people are employed,20,000 people are unemployed,the working-age population is 250,000,and 50,000 people are out of the labor force.Calculate the unemployment rate.

Question 36

Jack was unemployed two weeks ago but just started a new job.As a result of this increase in the number of employed workers,which of the following occurred?

A) The labor force participation rate increased.
B) The unemployment rate increased.
C) The labor force participation rate decreased.
D) The unemployment rate decreased.

Question 37

The household survey asks adults about their employment status and is used to compile the monthly unemployment rate.

Question 38

If the number of unemployed workers is 19 million,the number in the working-age population is 500 million,and the unemployment rate is 4%,how many workers are in the labor force?

A) 1 million
B) 20 million
C) 475 million
D) 481 million

Question 39

What impact would including members of the military in employment,labor force,and working-age population statistics have on the unemployment rate and the labor force participation rate?

A) Including members of the military would increase the unemployment rate and reduce the labor force participation rate.
B) Including members of the military would reduce the unemployment rate and increase the labor force participation rate.
C) Including the military would increase both the unemployment rate and the labor force participation rate.
D) Including the military would reduce both the unemployment rate and the labor force participation rate.

Question 40

For the last few decades,the labor force participation rates of men have ________,and the labor force participation rates of women have ________.

A) risen; risen
B) fallen; fallen
C) risen; fallen
D) fallen; risen

Question 41

The full-employment rate of unemployment is zero.

Question 42

By offering training to workers whose firms laid them off because of competition from foreign firms,the federal government is attempting to reduce

A) frictional unemployment.
B) structural unemployment.
C) cyclical unemployment.
D) seasonal unemployment.
E) unnatural unemployment.

Question 43

When an economy is at its natural rate of unemployment,which of the following will be true?

A) The unemployment rate will be 0%.
B) The labor force participation rate will be 100%.
C) The unemployment rate will be greater than 0%.
D) Only structural unemployment as a result of technological change will exist in the economy.

Question 44

Jack just told his boss that he thinks his boss is an idiot.It is likely that Jack will be experiencing ________ unemployment in the near future.

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

Question 45

Sarah is a full-time student who is not looking for work.What kind of unemployment is Sarah experiencing?

A) cyclical
B) structural
C) frictional
D) Sarah is not experiencing unemployment of any kind because she is not currently part of the labor force.

Question 46

The U.S.unemployment insurance program

A) increases the amount of time the unemployed spend searching for a job.
B) decreases the level of frictional unemployment.
C) pays the unemployed a benefit equal to twice the average wage.
D) eliminates structural unemployment.

Question 47

Eliminating structural unemployment would be good for the economy.

Question 48

Describe the three types of unemployment.

Question 49

When the labor market is at full employment

A) there is only cyclical unemployment in the economy.
B) there is only structural unemployment in the economy.
C) the unemployment rate is 0%.
D) there is no cyclical unemployment in the economy.

Question 50

An example of a seasonally unemployed worker would be

A) a software engineer who is laid off because of declining demand for the software he writes.
B) a day care provider who quits his job to go back to school.
C) a General Motors employee loses her job because the company is downsizing its work force.
D) a ski lift operator who loses his job when the snow melts in the spring.
E) a mother who quits her job to stay home with her children.

Question 51

Emma is a road construction worker.During the winter months,emmy finds it more difficult to get work.The unemployment Emma experiences in the winter is

A) structural.
B) cyclical.
C) seasonal.
D) functional.

Question 52

The natural rate of unemployment is made up of

A) frictional, cyclical, and structural unemployment.
B) frictional and cyclical unemployment.
C) cyclical and structural unemployment.
D) frictional and structural unemployment.
E) seasonal and structural unemployment.

Question 53

Which of the following is an example of a worker experiencing frictional unemployment?

A) A worker quits his job at the Post Office to find more interesting work.
B) A computer programmer loses her job because it is outsourced to India.
C) An employee is laid off because the economy is suffering a recession.
D) A United Airlines pilot loses her job because of lack of demand for air travel.

Question 54

An increase in cyclical unemployment will result in

A) an increase in the natural rate of unemployment.
B) an increase in the unemployment rate.
C) an increase in structural unemployment.
D) a decrease in frictional unemployment.

Question 55

What is the natural rate of unemployment,and what types of unemployment constitute the natural rate of unemployment?

Question 56

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

Question 57

What are the three main kinds of unemployment?

A) frictional, seasonal, and cyclical
B) temporary, permanent, and volunteer
C) cyclical, structural, and temporary
D) structural, frictional, and cyclical

Question 58

We say that the economy is at full employment if the unemployment rate is equal to

A) zero.
B) the natural rate of unemployment.
C) the amount of cyclical unemployment.
D) the sum of frictional and cyclical unemployment.
E) the sum of structural and cyclical unemployment.

Question 59

In September 2011,Bank of America laid off 30,000 employees.The employees who were laid off due to the effects of the recession would be considered

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

Question 60

Explain what economists mean by full employment and why this rate of unemployment is not zero.

Question 61

Figure 20-1

Refer to Figure 20-1.Based on the graph of the labor market above,if a minimum wage is set at $5 per hour,which of the following will occur?

A) The unemployment rate will rise.
B) The unemployment rate will fall.
C) The level of unemployment will rise, but the percentage of the labor force unemployed will not change.
D) None of the above will occur.

Question 62

The unemployment rate tends to be higher in the European Union as compared to the United States.

Question 63

The equilibrium wage in a local labor market is $6 per hour.If a minimum wage of $8 per hour is imposed,which of the following will occur?

A) There will be an increase in unemployment.
B) There will be an increase in the quantity of labor demanded by firms.
C) There will be a decrease in the quantity of labor supplied by households.
D) All of the above will occur.

Question 64

Which of the following is the smallest portion of the market basket of goods that makes up the CPI?

A) housing
B) food and beverages
C) transportation
D) apparel

Question 65

The CPI is also referred to as

A) the GDP deflator.
B) the inflation-consumption index.
C) the cost-of-living index.
D) the producer price index.

Question 66

What effect does the payment of government unemployment insurance have on the unemployment rate?

Question 67

Labor unions cause unemployment because the union contract wage is set

A) below the market wage, causing a shortage of labor.
B) below the market wage, causing a surplus of labor.
C) above the market wage, causing a surplus of labor.
D) above the market wage, causing a shortage of labor.

Question 68

An efficiency wage

A) is higher than the market wage and tends to increase productivity.
B) is lower than the market wage and tends to increase productivity.
C) is higher than the market wage and tends to decrease productivity.
D) is lower than the market wage and tends to decrease productivity.

Question 69

Why would a firm pay efficiency wages?

Question 70

The broadest measure of the price level that includes all final goods and services is

A) the producer price index .
B) the consumer price index.
C) the GDP deflator.
D) the wholesale price index.

Question 71

The most widely used measure of inflation is based on which of the following price indices?

A) the producer price index
B) the consumer price index
C) the GDP deflator
D) the wholesale price index

Question 72

With the exception of during recessions,workers in Canada are eligible for unemployment benefits for about twice as long a period of time as workers in the United States.As a result,

A) the average duration of unemployment is longer in the United States than in Canada.
B) the unemployment rate in Canada is usually higher than in the United States.
C) the opportunity cost of job search in Canada is lower than in the United States.
D) frictional unemployment is higher, on average, in the United States than in Canada.

Question 73

Why might firms pay wages that are above the equilibrium wage in a market?

A) to increase the productivity of their workers
B) to reduce the unemployment rate
C) to encourage workers to form labor unions
D) to reduce profit

Question 74

During the recession of 2007-2009,the unemployment rate in the United States was

A) lower than the unemployment rates in both Germany and Canada.
B) higher than the unemployment rates in both Germany and Canada.
C) lower than the unemployment rate in Germany but higher than the unemployment rate in Canada.
D) lower than the unemployment rate in Canada but higher than the unemployment rate in Germany.

Question 75

Figure 20-1

Refer to Figure 20-1.Based on the graph of the labor market above,if a minimum wage of $8 per hour is imposed,which of the following will result?

A) The quantity of labor demanded by firms will rise.
B) The quantity of labor demanded by firms will fall.
C) The unemployment rate will fall.
D) Both A and C will occur.

Question 76

The unemployment rate is higher with a minimum wage law than it would be without a minimum wage law.

Question 77

Paying efficiency wages are a way for a company to cut costs and become more efficient,and are therefore lower than market wages.

Question 78

Which of the following explains why many European countries have unemployment rates that are higher than in the United States?

A) Technological change occurs at a faster rate in Europe, so structural unemployment is higher in Europe.
B) European countries offer higher unemployment benefits than the United States.
C) Firms in European countries offer employees higher wages and higher benefits than do firms in the United States.
D) The minimum wage in Europe is lower than it is in the United States.

Question 79

Establishing a state employment agency that speeds up the process of matching unemployed workers with unfilled jobs is an attempt to lower

A) frictional unemployment.
B) structural unemployment.
C) cyclical unemployment.
D) seasonal unemployment.
E) unnatural unemployment.

Question 80

Which of the following has a tendency to raise the unemployment rate?

A) implementing a minimum wage in an economy
B) reducing unemployment insurance in an economy
C) offering wages at the market-clearing rate
D) reducing labor unions membership in an economy