Deck 12: Unemployment

Question 1

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.

Answer 1

E

Question 2

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

Answer 2

D

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

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 5

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 6

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 7

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 8

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 9

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 10

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 11

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 12

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 13

What best describes unemployment spells in the United States?

A)Most spells of unemployment are rather short, and therefore most weeks of unemployment can be attributed to these short spells.
B)Most spells of unemployment are rather short, but most weeks of unemployment are attributed to very long spells.
C)Most spells of unemployment are rather long, and therefore most weeks of unemployment can be attributed to these long spells.
D)Most spells of unemployment are rather long, but most weeks of unemployment are attributed to short spells.
E)Most spells of structural unemployment are much shorter than most spells associated with frictional unemployment, but how these two interact to determine the average length of an unemployment spell is unknown.

Question 14

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 15

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 16

Compared to offering no unemployment benefits, 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 17

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 18

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 19

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

Question 20

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 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 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 24

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 25

Since 1980, unemployment rates have been _________ in Europe relative to in United States.

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

Question 26

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 27

If the seasonally unemployed no longer qualified for unemployment insurance benefits, then we would expect

A)no seasonal unemployment.
B)no seasonal workers.
C)higher wages for seasonal workers.
D)lower wages for seasonal workers.
E)greater UI benefits paid to non-seasonal workers.

Question 28

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.

Question 29

The likelihood of experiencing a spell of unemployment lasting at least 12 months

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

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)An informal agreement between a firm and its employees to have the firm fire its most expensive workers first during an economic contraction.
E)A historical agreement between a firm and its employees that the firm pays workers based on a combination of age, experience and education.