Deck 12: Unemployment

Question 1

According to the neo-classical 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 employment rate would increase.
E)Unemployed workers would remain unemployed for longer periods of time.

Answer 1

D

Question 2

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 ten weeks before finding a new job, and 65 are unemployed for fifteen 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 2

C

Question 3

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)Unemployment benefits are 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.

Answer 3

E

Question 4

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 5

Which of the following would not increase the asking wage?

A)The government expands UI benefits from 26 to 52 weeks.
B)The government increases the maximum weekly unemployment benefit from $500 to $800.
C)An increase in the unemployment rate.
D)Having one's spouse receive a pay raise.
E)The government stops taxing UI benefits.

Question 6

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 7

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 8

How does the asking wage depend on the unemployment insurance 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 it is when not receiving UI benefits.
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 9

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 10

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 11

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

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

Question 12

In the United States from 1950 to 2005, it is most likely that an unemployed person will

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.

Question 13

The United States funds its unemployment compensation system by

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

Question 14

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 15

Consider an economy with a labor force of 200 million people-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 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.
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 17

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 18

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 19

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 20

An important development during the Great Recession of 2007-2010 was that

A)more than 35 percent of all unemployed workers remained unemployed for more than 26 months.
B)most unemployment spells lasted 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 21

If the intertemporal substitution hypothesis is correct, then

A)the unemployment rate is artificially high.
B)the unemployment rate is 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 won't exist.

Question 22

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 23

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 24

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

A)Workers are willing to reduce labor supplied during a recession.
B)Increases in unemployment may be voluntary as workers collect UI 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

Which is not a likely explanation as to why unemployment rates are higher in Europe than in the United States?

A)Most European countries offer more generous unemployment insurance benefits than in the United States.
B)Most European countries have stronger employment protection restrictions than in the United States.
C)There is more wage rigidity in Europe than in the United States.
D)Europeans are less productive than Americans.
E)Most European countries offer unemployment benefits for longer than they are available in the United States.

Question 26

In 2012, the likelihood of experiencing a spell of unemployment lasting at least 12 months

A)was roughly the same in the United States as it was in Europe.
B)was much lower in the United States than in Europe.
C)was much higher in Europe than in the United States with all European countries having at least 30 percent of their unemployed experiencing a spell of unemployment of at least 12 months.
D)varied substantially across European countries, with some rivaling the United States but many others being much higher than in the United States.
E)varied substantially across European countries, with some rivaling the United States but many others being much lower than in the United States.

Question 27

From 1980 through 2005, unemployment rates have been _________ in Europe relative to in United States.

A)higher
B)lower
C)about the same
D)unpredictable
E)adjusting

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

The natural rate of unemployment is higher in many European countries than in the United States largely because

A)European countries tend to offer more generous unemployment benefits than in the United States.
B)European countries tend to place fewer conditions on employers regarding working conditions and firing workers than in the United States.
C)the labor force is smaller in European countries than in the United States.
D)more European workers are paid an annual salary rather than an hourly wage compared to workers in the United States.
E)many European countries have recently targeted policies to fight hyperinflation rather than worrying about unemployment.

Question 30

Which of the following is best considered an implicit contract?

A)A union contract that specifies hourly wages and fringe benefits.
B)A union contract that specifies how overtime wages will be calculated.
C)An informal agreement between a firm and its employees to reduce hours of work for everyone a little bit during an economic contraction in order to prevent firing anyone.
D)A firm offering health insurance to all of its workers in order to abide by the Affordable Care Act.
E)A historical agreement between a firm and its employees that the firm pays workers based on a combination of age, experience, and education.