Deck 7: The Labor Market,wages,and Unemployment

Question 1

Over the past 50 years or so,

A)the male employment-population ratio always has been rising.
B)the female employment-population ratio generally has been falling.
C)the male employment-population ratio generally has been rising.
D)the female employment-population ratio generally has been rising.
E)None of the above is correct.

Answer 1

D

Question 2

Using Figure 7.1,which depicts the U.S.unemployment rate,identify the year(s)of the peak of the boom.

A)1983
B)1989
C)2001
D)all of the above
E)none of the above

Answer 2

D

Question 3

Using Figure 7.1,which depicts the U.S.unemployment rate,which of the following year(s)are the trough of a recession?

A)2001
B)1983
C)1979
D)all of the above
E)none of the above

Answer 3

B

Question 4

The labor market determines:

A)structural unemployment.
B)the equilibrium quantity of employment.
C)the equilibrium wage and the quantity of employment.
D)the number of unemployed.
E)the minimum wage.

Question 5

If the U.S.real output is growing and labor income accounts for about two-thirds of this,

A)the unemployment rate is falling.
B)on average,capital is getting poorer over time.
C)income inequality is decreasing.
D)on average,workers are getting richer over time.
E)we are not getting any better off.

Question 6

Using Figure 7.1,which depicts the U.S.unemployment rate,which of the following year(s)are the trough of a recession?

A)1980
B)1989
C)2001
D)all of the above
E)none of the above

Question 7

Using Figure 7.1,which depicts the U.S.unemployment rate,which of the following year(s)are the trough of a recession?

A)1974
B)1983
C)1992
D)all of the above
E)none of the above

Question 8

The net change in employment is:

A)new jobs.
B)the difference between job creation and job destruction.
C)called job creation.
D)the unemployment rate.
E)the labor force participation rate.

Question 9

The unemployment rate is defined as:

A)the ratio of all adults not working to the total population.
B)the ratio of unemployed to employed members of the labor force.
C)the ratio of unemployed members of the labor force to the total labor force.
D)the ratio of discouraged workers to the total population.
E)the ratio of unemployed members of the labor force to the total population.

Question 10

The quote "It's a recession when your neighbor loses his job;it's a depression when you lose yours" is attributed to:

A)Karl Marx.
B)Franklin D.Roosevelt.
C)John Maynard Keynes.
D)Harry S Truman.
E)Alan Greenspan

Question 11

Generally,during a recession:

A)inflation rises.
B)the natural rate of unemployment rises.
C)the employment rate rises.
D)the unemployment rate rises.
E)there is no change in the unemployment rate.

Question 12

Consider Table 7.1.Between December 2006 and January 2007,the unemployment rate _______________ and the labor participation rate _______________ (rounded to 1 decimal point).

A)rose;fell
B)rose;rose
C)rose;was about the same
D)fell;fell
E)Not enough information is given.

Question 13

The Great Depression:

A)is synonymous with the birth of modern macroeconomics.
B)was a rapid expansion in output.
C)stimulated the creation of Keynesian economics.
D)was largely responsible for the rational expectations revolution.
E)Both a and c are correct.

Question 14

Consider Table 7.1.In December 2006,the unemployment rate was:

A)about 3.0 percent.
B)about 4.5 percent.
C)about 33.8 percent.
D)about 63.4 percent.
E)about 4.7 percent.

Question 15

Given the unemployment rate data depicted in Figure 7.1,identify the year(s)of the peak of the boom.

A)1989
B)2001
C)1983
D)all of the above
E)none of the above

Question 16

Consider Table 7.1.In January 2007,the unemployment rate was:

A)about 4.8 percent.
B)about 4.6 percent.
C)about 33.8 percent.
D)about 3.0 percent.
E)about 9.0 percent.

Question 17

During the Great Depression,unemployment reached about __________ at its peak.

A)8 percent
B)15 percent
C)25 percent
D)40 percent
E)5 percent

Question 18

Historically,for most Americans,the length of unemployment is:

A)usually more than one year.
B)usually more than three months.
C)usually less than three months.
D)indefinite.
E)less than one week.

Question 19

Over the course of his or her lifetime,the average American worker will spend __________ hours on the job.

A)40,000
B)1 million
C)90,000
D)100,000
E)35,000

Question 20

Over the past 50 years or so,

A)the employment-population ratio always has been rising.
B)the employment-population ratio generally has been falling.
C)the unemployment-population ratio generally has been rising
D)the employment-population ratio generally has been rising.
E)None of the above is correct.

Question 21

In the labor market,the intersection of the supply and demand for labor determines:

A)inflation and the real wage.
B)the wage and the population,N.
C)the interest rate and the unemployment rate.
D)the wage and the employment-population ratio,L/N.
E)the wage and the number of discouraged workers.

Question 22

Wage rigidity:

A)helps the labor market achieve equilibrium.
B)prevents the capital market from realizing equilibrium.
C)prevents the labor market from realizing equilibrium.
D)prevents unemployment.
E)does none of the above.

Question 23

If the income taxes on wages increase,the labor supply curve will shift left,but what happens to the unemployment rate?

A)It unambiguously falls because the labor participation rate changes.
B)It unambiguously falls because some workers drop out of the workforce.
C)It unambiguously rises because some workers drop out of the workforce.
D)It is ambiguous because some workers drop out of the workforce.
E)None of the above is correct.

Question 24

An increase in labor regulations results in:

A)the supply curve shifting left.
B)the labor demand curve shifting left.
C)the labor supply curve shifting left and the labor demand curve shifting right.
D)the labor demand curve shifting right.
E)neither the labor supply nor demand curves shifting.

Question 25

Because of the dynamics of the workforce,for example,whether or not workers become discouraged when there are changes in the economy,

A)the unemployment rate is not necessarily an accurate gauge of the labor market.
B)the unemployment rate is a precise gauge of the labor market.
C)it might be best to consider the employment population ratio rather than the unemployment rate.
D)Both a and c are correct
E)None of the above is correct.

Question 26

An institutional fixed wage set above the equilibrium wage is called:

A)the market wage.
B)the minimum wage.
C)a wage rigidity.
D)a real rigidity.
E)none of the above

Question 27

The labor demand curve slopes downward because:

A)wages are inflexible.
B)wages are higher when demand falls.
C)of the diminishing marginal product of labor.
D)of the income effect.
E)None of the above is correct.

Question 28

In the labor market depicted in Figure 7.2,an increase in oil prices:

A)shifts labor demand from to
.
B)shifts labor supply from to
.
C)shifts labor demand from to
.
D)produces no change in either the labor supply or demand curves.
E)does none of the above.

Question 29

The demand for labor curve is:

A)ad hoc.
B)derived from the firm's profit maximization problem.
C)equal to the average product of labor.
D)derived from the marginal product of labor.
E)Both b and d are correct.

Question 30

Most of the total weeks of lost work are accounted for by:

A)retirees.
B)people who are discouraged workers.
C)people who are incarcerated.
D)people who are unemployed for a long period of time.
E)None of the above.

Question 31

If the minimum wage is set below the equilibrium market wage,

A)it increases unemployment.
B)it is effective and reduces unemployment.
C)it equals the black market wage.
D)it is not effective,because it is lower than firms are willing to pay for labor.
E)None of the above are correct.

Question 32

A decrease in the income tax will result in:

A)the labor demand curve shifting right.
B)the labor demand curve shifting left.
C)the labor supply curve shifting left and the labor demand curve shifting right.
D)the labor supply curve shifting right.
E)neither the labor supply nor demand curves shifting.

Question 33

An increase in the income taxes on wages results in:

A)the labor demand curve shifting left.
B)the labor supply curve shifting left.
C)the labor supply and demand curves shifting left.
D)the labor demand curve shifting right.
E)neither the labor supply nor demand curves shifting.

Question 34

In the labor market depicted in Figure 7.2,a decrease in labor regulation:

A)shifts labor supply from to
.
B)shifts labor demand from to
.
C)shifts labor demand from to
.
D)shifts labor supply from to
.
E)does none of the above.

Question 35

In the labor market depicted in Figure 7.2,an increase in the income tax would result in:

A)a shift in labor supply from to
.
B)a shift in labor demand from to
.
C)a shift in labor demand from to
.
D)a shift in labor supply from to
.
E)none of the above

Question 36

In the labor market depicted in Figure 7.2,an increase in the income tax would result in:

A)a shift in labor supply from to
.
B)a shift in labor demand from to
.
C)a shift in labor demand from to
.
D)no change in either the labor supply or demand curves.
E)none of the above

Question 37

In the labor market depicted in Figure 7.2,investment in new physical capital:

A)shifts labor supply from to
.
B)shifts labor supply from to
.
C)shifts labor demand from to
.
D)shifts labor demand from to

E)does none of the above.

Question 38

The explanation for the upward sloping supply of labor curve is that:

A)the marginal product of capital is positive.
B)as the wage rises the opportunity cost of leisure rises,so people work more.
C)as the wage rises,people want to work less.
D)the marginal product of labor is diminishing.
E)None of the above is correct.

Question 39

A drawback of unemployment benefits is:

A)it gives workers a disincentive to find work.
B)it costs taxpayers over 50 percent of their income.
C)the payments are too large.
D)it lengthens the time spent unemployed.
E)Both a and d are correct.

Question 40

When an individual becomes unemployed,the average unemployment benefit:

A)is about $10,000 per year.
B)is about $275 per month.
C)is about $275 per week.
D)equals what the individual earned before becoming unemployed.
E)is about $10 per day.

Question 41

One,or more,consequence(s)of wage rigidity is (are):

A)higher rates of unemployment.
B)greater labor market volatility.
C)labor market stability.
D)a lower unemployment rate.
E)a and b

Question 42

Europe's relatively high unemployment rates can be attributed to:

A)adverse shocks.
B)inefficient labor market institutions.
C)strong labor unions.
D)generous unemployment insurance.
E)all of the above

Question 43

The "natural rate of unemployment" is the unemployment rate that would prevail:

A)during changes in the business cycle.
B)if the economy were in neither a boom nor a recession.
C)if people voluntarily leave work.
D)during seasonal changes in the economy.
E)if the unemployment rate were zero.

Question 44

A key reason that unemployment in the United States is so low compared to most of Europe is because of:

A)no cyclical unemployment.
B)low frictional unemployment.
C)high structural unemployment.
D)low structural unemployment.
E)no structural unemployment.

Question 45

The natural rate of unemployment is decomposed into:

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

Question 46

Unemployment is given by __________ and the natural rate of unemployment is __________.

A)Frictional + Structural + Cyclical unemployment;Frictional + Structural unemployment
B)Frictional + Structural - Cyclical unemployment;Frictional + Structural unemployment
C)Frictional + Cyclical unemployment;Frictional + Cyclical unemployment
D)Structural + Cyclical unemployment;Structural unemployment
E)Cyclical unemployment;Frictional + Structural unemployment

Question 47

Structural unemployment is the unemployment that results from:

A)workers leaving the labor force.
B)workers changing jobs in a dynamic economy.
C)workers losing their jobs during seasonal changes.
D)workers losing jobs during recession.
E)prevailing labor market institutions.

Question 48

Cyclical unemployment is the unemployment that results from:

A)prevailing labor market institutions.
B)workers losing jobs during recession.
C)workers changing jobs in a dynamic economy.
D)workers losing their jobs during seasonal changes.
E)workers leaving the labor force.

Question 49

__________ historically has had the lowest unemployment rate since 1960.

A)The United States
B)Japan
C)France
D)The United Kingdom
E)Germany

Question 50

Unemployment benefits in the United States are extended generally about __________,while in Europe they average __________.

A)six months;one year
B)six months;five years
C)three months;two years
D)six weeks;six months
E)five years;six months

Question 51

The rise in the employment-population ratio largely is due to:

A)a shrinking U.S.population.
B)more teenagers entering the labor force.
C)more women entering the labor force.
D)an increase in immigrant workers.
E)It is unexplained.

Question 52

Conventional wisdom is that most of the natural rate of unemployment is due to:

A)bad fiscal policy.
B)frictional unemployment.
C)cyclical unemployment.
D)structural unemployment.
E)bad monetary policy.

Question 53

The gradual rise in unemployment in the 1960s and 1970s,in part,is explained by:

A)the Vietnam War.
B)increased female participation in the labor force.
C)the baby boomers.
D)all of the above
E)none of the above

Question 54

The causes of increased female participation in the labor market are:

A)changing social norms.
B)technological changes in managing fertility.
C)reduced discrimination.
D)all of the above
E)a and c

Question 55

The natural rate of unemployment is the unemployment rate that would prevail:

A)if inflation is zero.
B)if there are no discouraged workers.
C)if the economy were in neither a boom nor a recession.
D)during seasonal changes in the economy.
E)if the unemployment rate is zero.

Question 56

In the 1960s,European unemployment rates were __________ compared to the United States and now are __________.

A)much higher;much higher
B)much lower;about the same
C)much lower;much higher
D)about the same;much lower
E)none of the above

Question 57

Consider the labor market depicted in Figure 7.3.
Wage w¯ is called __________ and __________ unemployment.

A)wage rigidity;decreases
B)wage rigidity;increases
C)the market wage;does nothing to
D)the market wage;increases
E)None of the above is correct.

Question 58

Frictional unemployment is the unemployment that results from:

A)workers losing jobs during recession.
B)workers losing their jobs during seasonal changes.
C)workers changing jobs in a dynamic economy.
D)prevailing labor market institutions.
E)workers leaving the labor force.

Question 59

Of the richest countries,__________ work the most hours per week.

A)Germans
B)Americans
C)the Japanese
D)Canadians
E)Australians

Question 60

Consider the labor market depicted in Figure 7.3.Wage w¯ is called __________ and __________.

A)wage rigidity;reduces unemployment
B)wage rigidity;decreases labor market volatility
C)a flexible wage;increases labor market volatility
D)wage rigidity;increases labor market volatility
E)the market wage;increases unemployment

Question 61

By 2002,the college wage premium was about __________ than the wage of the typical worker with a high school education.

A)50 percent more
B)10 percent more
C)100 percent more
D)90 percent more
E)None of the above is correct.

Question 62

The percentage of total hours worked by the supply of college-educated workers compared to the percentage of total hours worked by high-school educated workers has been:

A)constant.
B)climbing steadily to about 20 percent.
C)falling steadily to about 50 percent.
D)climbing steadily to about 50 percent.
E)doing none of the above.

Question 63

Since the end of World War II,the percentage of women in the workforce has been falling.

Question 64

Consider the simplified payment system for the victims of 9/11:
• The family of a 65-year-old service worker earning $10,000 a year receives $300,000 in compensation.
• The family of a 30-year-old bond trader earning $175,000 a year receives $4.35 million.
Which statement best describes the difference in the payments between the service worker and the bond trader?

A)The present value of the bond trader's lifetime income is greater than the service worker's.
B)Because of her age,the bond trader had less savings to rely on so her family received more compensation.
C)The future value of the bond trader's lifetime income is less than the service worker's.
D)Such a discrepancy in compensation would never be the case.
E)None of the above is correct.

Question 65

Unemployment due to workers shuffling from one job to the next is called cyclical unemployment.

Question 66

Consider Figure 7.4.If the demand curve for college graduates is characterized by
,which of the following describes why the demand for labor for college graduates is higher than that for high school students,characterized by
?

A)There is a growing number of college graduates.
B)There are fewer college graduates than high school graduates.
C)College graduates have a higher marginal product.
D)College graduates are smarter than high school graduates.
E)None of the above is correct.

Question 67

Unemployment due to institutional frictions is called structural unemployment.

Question 68

The idea that you value receiving $1,000 today more than in 10 years in the future is called:

A)real rate of return.
B)compound interest.
C)present discounted value.
D)utility maximization.
E)intertemporal substitution.

Question 69

Consider Figure 7.4.Given what we know about the difference between college- and high school-educated workers,which equilibrium characterizes the high school graduate experience,on average?

A)the intersection of and

B)the intersection of and

C)the intersection of and

D)the intersection of and

E)none of the above

Question 70

Consider Figure 7.4.If the demand curve for college graduates is characterized by
,which of the following is a reason why the demand for labor for college graduates is higher than that for high school students,characterized by
L1D?

A)skill-based technological change
B)globalization,which leads to college graduate scarcity
C)There are fewer college graduates than high school graduates.
D)There is a growing number of college graduates.
E)a and b are correct.

Question 71

If the number of employed is 145,926,the number of unemployed is 6,849,and the number of discouraged workers is 77,676,the unemployment rate is about 4.5 percent.

Question 72

Unemployment generally falls during economic booms.

Question 73

For most Americans,the length of unemployment is usually less than three months.

Question 74

Beginning in __________,the wage premium began __________.

A)1980;slowing down
B)1980;accelerating
C)1963;trending down
D)1970;accelerating
E)1970;rising

Question 75

The average unemployment benefit of an American worker is about $275 per week and lasts about six months.

Question 76

Consider Figure 7.4.Given what we know about the number of hours worked by college graduates and the wage premium received by college graduates,which equilibrium in the figure characterizes these empirical observations,on average?

A)the intersection of and

B)the intersection of and

C)the intersection of and

D)the intersection of and

E)none of the above

Question 77

You win the lottery,which pays $1 million in 20 annual $50,000 payments.Your friends ask how much that would be if you received a single lump sum payment today.You do not have your calculator,but you show them the following equation to help them solve it themselves,assuming the interest rate is 10 percent:

A)
B)
C)
D)
E)Either a or b is correct.

Question 78

The equation means you:

A)would prefer to receive $386 today than $1,000 in 10 years.
B)are indifferent between receiving $386 today and $1,000 in 10 years.
C)would prefer to receive $1,000 in 10 years than $386 today.
D)are indifferent between receiving $386 today and $1,000 in 100 years.
E)do not have enough information.

Question 79

Large unemployment benefits give workers an incentive to find work.

Question 80

If the civilian noninstitutionalized population is 230,108,the number of employed is 145,926,the number of unemployed is 6,849,and the number of discouraged workers is 77,676,the unemployment rate is about 3.0 percent.