Deck 20: The Labor Market, Employment, and Unemployment

Question 1

An increase in labor supply will cause, other things the same ________.

A) real wages and employment to rise.
B) real wages to fall and employment to rise.
C) real wages to rise and employment to fall.
D) real wages and employment to fall.

Answer 1

real wages to fall and employment to rise.

Question 2

If the marginal product of labor exceeds that cost of hiring an additional worker, the firm should ________.

A) fire some workers.
B) raise the wage rate.
C) add more workers.
D) lower the wage rate.

Answer 2

add more workers.

Question 3

Over the past five decades, the U.S. civilian unemployment rate has varied between, roughly, ________.

A) 3% and 11%
B) 55% and 60%
C) 6% and 8%
D) 0.2% to 0.4%

Answer 3

3% and 11%

Question 4

Suppose the marginal product of labor (MPL) is greater than the real wage. If the real wage remains constant, then we should expect ________.

A) an increase in employment and decrease in the MPL
B) an increase in the supply of labor and decrease in the MPL
C) an increase in leisure and no change in the MPL
D) an increase in the supply of labor and no change in the MPL

Question 5

Over the last 50 years, the employment ratio has risen most significantly among ________.

A) men.
B) women.
C) blacks.
D) Hispanics.

Question 6

Moving along the supply curve for labor, increases in the quantity of labor result from ________.

A) diminishing returns to labor effort
B) a rising cost of leisure
C) a reduced preference for leisure
D) more efficient recruitment of workers

Question 7

Suppose the marginal product of labor is , where Y is 12, and L is the quantity of workers. The supply of labor is given by L = 110 + 2.5 ∗ w. If the real wage is 50, what is the unemployment rate?

Question 8

In the U.S., the employment ratio is highest among ________, and lowest among ________.

A) women; both sexes combined
B) men; college-educated workers
C) women; men
D) men; women

Question 9

The employment ratio is the ________.

A) labor force divided by the population
B) proportion of the civilian working-age population that is employed
C) number of individuals employed divided by the size of the labor force
D) number of individuals employed divided by the number of the unemployed

Question 10

In the market for their services, workers face a trade-off between ________.

A) higher and lower wage jobs.
B) equilibrium and non-equilibrium solutions.
C) labor and leisure.
D) diminishing and increasing marginal productivity.

Question 11

Among the causes of an increase in labor supply is ________.

A) a relaxation of restrictions on child labor
B) an increase in enrollment at colleges
C) an improvement in worker productivity
D) a contraction of economic activity

Question 12

The upward-sloping character of the labor supply schedule assumes that the ________.

A) the substitution effect is equal to the income effect.
B) the substitution effect is larger than the income effect.
C) the substitution effect is smaller than the income effect.
D) the ratio of real wages to the marginal product of labor is equal to the equilibrium nominal wage.

Question 13

The demand for labor schedule is the same as ________.

A) real wage line.
B) supply of labor schedule.
C) the minimum wage rate in that economy.
D) the marginal product of labor schedule.

Question 14

The unemployment rate ________.

A) is essentially unchanged over the business cycle.
B) rises in economic expansions and falls in economic contractions.
C) falls consistently over both economic expansions and recessions.
D) varies over the course of the business cycle.

Question 15

An increase in outout due to either a positive supply or demand shock to production will lead to ________.

A) an increase in the demand for labor and higher real wages.
B) a decrease in the demand for labor and higher real wages.
C) an increase in the demand for labor and lower real wages.
D) a decrease in the demand for labor and lower real wages.

Question 16

The equation Y = A K0.3L0.7 is known as the ________.

A) Cobb-Douglas production function
B) labor supply curve
C) marginal product of labor
D) capital-to-employment function

Question 17

Over the last 50 years, the employment ratio has fallen most significantly among ________.

A) men.
B) women.
C) blacks.
D) Hispanics.

Question 18

The unemployment rate in the U.S. is equal to ________.

A) the number of individuals unemployed in the U.S. divided by the U.S. population
B) the number of individuals unemployed divided by the U.S.labor force
C) the size of the U.S. population divided by the number of individuals unemployed
D) the size of the U.S. labor force divided by the number of individuals unemployed

Question 19

From 1965 to 2010, the average real wages for all workers have ________.

A) fallen.
B) risen.
C) remained essentially unchanged.
D) risen in economic contractions and fallen in economic expansions.

Question 20

The highest unemployment rate recorded since World War II came in ________.

A) September 1929.
B) January 1961.
C) December 1982.
D) October 2009.

Question 21

The process of globalization has ________.

A) decreased inequality.
B) increased inequality.
C) had little measurable effect on income inequality.
D) has increased income inequality in developing countries but decreased inequality in developed countries.

Question 22

A decrease in discrimination against women after the 1970s led most directly to ________.

A) an increase in labor demand.
B) a decrease in labor demand.
C) a decrease in education
D) a decrease in labor supply.

Question 23

The wage gap between high school and college graduates can be explained, other things the same, by ________.

A) a greater increase in the demand for high school educated labor than college-educated labor.
B) a greater increase in the supply of college-educated labor than high school educated labor.
C) a greater increase in the demand for high school educated labor than in the supply of high school educated labor.
D) a greater increase in the demand for college-educated labor than high school educated labor.

Question 24

Having observed that both the real wage and the quantity of employment are increasing, we may conclude that ________ is not ________.

A) demand; decreasing
B) supply; decreasing
C) demand; increasing
D) supply; increasing

Question 25

Which of these is not a good example of skill-biased technical change?

A) GPS navigation equipment in delivery trucks
B) web-enabled virtual classrooms
C) self-service check out scanners
D) use of robots in automobile assembly

Question 26

During a recession, when unemployment is rising, the number of new jobs created is, typically, ________.

A) large, and higher than the number of jobs lost
B) small, and below the number of jobs lost
C) small, but higher than the number of jobs lost
D) large, and higher than net entrants to the labor force

Question 27

The percentage of hours worked by college educated workers since the 1960s has ________.

A) fallen.
B) stayed essentially unchanged.
C) increased.
D) moved in the opposite direction of the college premium.

Question 28

The increased labor force participation rates for women since the 1970s led most directly to ________.

A) an increase in labor demand.
B) a decrease in labor demand.
C) a decrease in labor supply.
D) an increase in labor supply.

Question 29

Prior to the 1980s ________.

A) the hourly wage of women exceeded that of their male counterparts.
B) the employment ratio for women was equal to that of men.
C) a majority of women were not in the labor force.
D) the majority of men were not in the labor force.

Question 30

Among the causes of an increase in labor demand is ________.

A) a relaxation of restrictions on child labor
B) an increase in enrollment at colleges
C) an improvement in worker productivity
D) a contraction of economic activity

Question 31

Among the causes of an increase in labor demand is ________.

A) improved availability and affordability of day care for children
B) an increase in enrollment at colleges
C) an increase in the college wage premium
D) an expansion of economic activity

Question 32

Net entrants to the labor force is likely to be highest when the economy ________.

A) is entering a recession
B) nears the peak of an expansion
C) has passed the peak of an expansion
D) begins to recover from a recession

Question 33

The skill-biased character of technological change in recent decades has tended to cause ________.

A) a decrease in the demand for college-educated labor.
B) a higher rate of unemployment among college-educated labor.
C) a lower rate of unemployment among unskilled labor.
D) an increase in demand for college-educated labor.

Question 34

Assume that college-educated labor and high school-educated labor are complements in production. That is, the two types of labor work together, so that an increase in the quantity of either type increases the productivity of the other type of labor. Is this consistent with the observed increase in the college wage premium?

Question 35

Over the course of recent years, the college premium has ________.

A) remained essentially unchanged.
B) risen.
C) fallen.
D) excluded civilians from calculations of the labor force.

Question 36

During a recession, when unemployment is rising, the number of new jobs created is, typically, ________.

A) large, but smaller than the number of jobs lost
B) small, and below the number of jobs lost
C) small, but higher than the number of jobs lost
D) large, but smaller than net entrants to the labor force

Question 37

Among the causes of an increase in labor supply is ________.

A) improved availability and affordability of day care for children
B) an increase in enrollment at colleges
C) an increase in the college wage premium
D) an expansion of economic activity

Question 38

Those who just stop looking for employment are known as ________.

A) cyclically unemployed.
B) discouraged workers.
C) frictionally unemployed.
D) chronically unemployed

Question 39

The principal cause of falling unemployment is ________.

A) an increase in net entrants to the labor force
B) a decrease in net entrants to the labor force
C) an increase in the number of new jobs created
D) a decrease in the number of jobs lost

Question 40

How might a decrease in the labor force participation of males be related to the increase in the participation rate for females?

Question 41

The largest number of individuals of working age in the U.S. population are ________.

A) discouraged workers.
B) unemployed.
C) employed.
D) not in the U.S. labor force.

Question 42

Referring to the graph above, assume that, at first, the labor market is in equilibrium at point 4. Then, demand shifts to pass through point 3, and the real wage adjusts to the new equilibrium. ________ is ________ at the new equilibrium, compared to the original equilibrium.

A) unemployment; larger
B) unemployment; smaller
C) the labor force; smaller
D) employment; larger

Question 43

Labor Market

On the graph above, the wage level at point ________ might represent an efficiency wage.

A) 2
B) 4
C) 6
D) 5

Question 44

Unemployment related to job search is known as ________.

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

Question 45

Unemployment that emerges during sectoral shifts in the economy is known as ________.

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

Question 46

The label "discouraged worker" refers to a change of status from ________.

A) employed to actively seeking employment
B) unemployed to employed
C) unemployed to not in the labor force
D) not in the labor force to unemployed

Question 47

Unemployment that develops as old industries die off is known as ________.

A) cyclical unemployment.
B) structural unemployment.
C) fricitional unemployment.
D) voluntary unemployment.

Question 48

For most of the unemployed, unemployment spells are________.

A) longer than a year.
B) longer than 10 years.
C) permanent.
D) shorter than three months.

Question 49

Empirical evidence strongly supports the view that unemployment insurance ________.

A) decreases unemployment.
B) has little effect on employment.
C) increases unemployment.
D) has little effect on unemployment.

Question 50

An increase in an effective federal minimum wage would tend to cause ________.

A) a decrease in wage rates and an increase in employment.
B) an increase in wage rates and employment.
C) a decrease in wage rates and employment.
D) an increase in wage rates and a decrease in employment.

Question 51

One source of structural unemployment is ________.

A) the seasonal character of production in some industries, e.g. agriculture in Alaska during winter months.
B) falling sales in an economic downturn.
C) wage rigidity.
D) high search costs.

Question 52

Unemployment that arises from a lack of skills is known as ________.

A) seasonal unemployment.
B) cyclical unemployment.
C) discouraged unemployment.
D) structural unemployment.

Question 53

The setting of minimum wages in the U.S. began with the ________.

A) Sherman Anti-Trust Act of 1890.
B) Garn St. Germain Act of 1982.
C) Depository Institutions Deregulation and Monetary Control Act of 1980.
D) Fair Labor Standards Act of 1938.

Question 54

Labor Market

On the graph above, suppose the labor market is in equilibrium at point 2, then the demand curve shifts down to the position shown on the graph. If the real wage has not changed, then the horizontal distance between points ________ measures the unemployment that results.

A) 2 & 4
B) 2 & 1
C) 3 & 4
D) 6 & 4

Question 55

Suppose the marginal product of labor is , where Y is 12, and L is the quantity of workers. The supply of labor is given by L = 110 + 2.5 ∗ w. Calculate the changes that occur in (a) employment, (b) unemployment, and (c) the size of the labor force, when the real wage declines from 45 to 42.

Question 56

The employment ratio is always ________ than labor force participation, because only the latter ________

A) larger; omits discouraged workers
B) smaller; includes the unemployed
C) smaller; omits people too young to work
D) larger; includes people looking for work

Question 57

Technical and "junior" colleges offering full-time degree programs that may be completed in two years or less are a rapidly growing segment of the U.S. economy. What are some likely impacts on aggregate flows into and out of employment status?

Question 58

Individuals who suffer from unemployment spells lasting more than six months are ________.

A) chronically unemployed.
B) frictionally unemployed.
C) discouraged workers
D) no longer counted as part of the labor force

Question 59

Labor Market

On the graph above, the wage level at point ________ might represent a binding minimum wage.

A) 2
B) 4
C) 6
D) 5

Question 60

Referring to the graph above, assume that, at first, the labor market is in equilibrium at point 4. In which scenario does unemployment rise, with no change in the quantity of employment?

A) real wage rises to the level of points 1 and 2
B) supply shifts to pass through point 5, with no change in the real wage
C) demand shifts to pass through point 3, with no change in the real wage
D) supply shifts to pass through point 3, with no change in the real wage

Question 61

If productivity growth accelerates, but workers do not realize it ________.

A) they will expect large wage hikes.
B) they will not expect large wage hikes.
C) the natural rate of unemployment will rise.
D) the number of discouraged workers will rise.

Question 62

Many economists view ________ as explaining most of the increase in the natural rate of unemployment in the U.S. from 1960 to 1980.

A) the rise in the percentage of young workers in the labor force
B) an increase in the percentage of the working-age population receiving disability insurance
C) a decrease in the size of the prison population
D) increased use of temporary workers

Question 63

Which of the following does not influence the natural rate of unemployment in the U.S.?

A) demographics.
B) the natural rate in Europe and Japan.
C) the composition of the labor force.
D) surprises in productivity growth.

Question 64

A classic early example of efficiency wages came in ________.

A) Nazi Germany.
B) 1973 with the increase in OPEC-determined oil prices.
C) 1914 at the Ford Motor Company.
D) 1890 with the Sherman Antitrust Act.

Question 65

Typically, employers compete with each other in the labor market to get and to retain the best possible workers. Explain how such competition might prevent the unemployment rate from ever being close to zero.

Question 66

Suppose researchers discover that a government program to match job seekers and employers has caused an increase in the unemployment rate. Does this mean that the program has failed?

Question 67

An increase in the prison population would tend to cause, other things the same, a decrease in ________.

A) federal disabilities benefits.
B) the use of temporary workers.
C) the college premium.
D) the natural rate of unemployment.

Question 68

Katz and Krueger found that minimum wage laws had a negligible impact on teenage unemployment in the fast-food industry. Describe the characteristics of labor demand and supply that might produce such a result.

Question 69

Between 1980 and 2010, the share of temporary workers in total U.S. employment ________.

A) fell.
B) rose.
C) remained essentially unchanged.
D) cannot be calculated due to the increase in illegal immigration during this period.

Question 70

The natural rate of unemployment ________.

A) is roughly the same in the U.S. and Europe.
B) is higher in the U.S. than in Europe.
C) cannot be calculated for European economies given their generous system of transfer payments.
D) is higher in Europe than in the U.S.

Question 71

Which of the following is likely to cause a decrease in the natural rate of unemployment?

A) an increase in the percentage of the working-age population receiving disability insurance
B) a decrease in the use of temporary workers
C) a growing percentage of young workers in the labor force
D) generous unemployment insurance benefits

Question 72

The process of bargaining for a large group of workers at one time rather than individually is known as ________.

A) collective bargaining.
B) autarky.
C) tertiary negotiations.
D) ornamental horticulture.

Question 73

Which of the following is not an aspect of the composition of the labor force?

A) the prison population.
B) workers taking disability.
C) the use of temporary workers.
D) the natural rate of unemployment.

Question 74

Workers who suffer disability are likely to suffer higher ________.

A) cyclical unemployment.
B) tertiary unemployment.
C) structural unemployment.
D) natural unemployment.

Question 75

People who end up in prison are particularly subject to ________.

A) higher cyclical unemployment.
B) higher structural unemployment.
C) lower cyclical unemployment.
D) lower seasonal unemployment.

Question 76

In the wake of Henry Ford's payment of efficiency wages in 1914 ________.

A) absenteeism and productivity fell.
B) absenteeism and productivity rose.
C) absenteeism rose and productivity fell.
D) absenteeism fell and productivity rose.

Question 77

When productivity growth has been rapid and then slows, the natural rate of unemployment is likely to ________.

A) decrease
B) be unaffected
C) increase
D) vary unpredictably

Question 78

Efficiency wages are ________.

A) market clearing wages.
B) wages that are above the market-clearing level.
C) equal to the real wage rate minus the nominal wage rate.
D) equal to the nominal wage rate divided by some measure of the general price level.

Question 79

The actual unemployment rate is equal to ________.

A) the natural rate of unemployment plus the cyclical rate.
B) the natural rate of unemployment minus the cyclical rate.
C) the natural rate of unemployment times the cyclical rate.
D) the natural rate of unemployment divided by the cyclical rate.

Question 80

The natural rate of unemployment ________.

A) is equal to 0.078 percent.
B) is a constant.
C) varies across time and countries.
D) is equal to the cyclical rate of unemployment divided by the actual rate.