Macro Ch 15 Unemployment

True/False Indicate whether the statement is true or false. ____ ____ ____ ____ ____ ____ ____ ____ ____ 1. Most people rely on income other than their labor earnings to maintain their standard of living. 2. The natural rate of unemployment is a type of unemployment that does not go away on its own even in the long run. 3. The labor force minus the number of employed equals the number of unemployed. 4. The Bureau of Labor Statistics U-1 measure of joblessness is smaller than its U-6 measure of joblessness. 5. The Bureau of Labor Statistics U-3 measure of joblessness is the official unemployment rate. 6. Most spells of unemployment are long, and most unemployment observed at any given time is short-term. 7. One explanation for long-run unemployment is that it takes time for workers to search for the jobs that are best suited for them. 8. Sectoral shifts temporarily cause unemployment. 9. If the wage is kept above the equilibrium level because of minimum-wage laws, then the result is unemployment; if the wage is kept above the equilibrium level for some other reason, the result need not be unemployment.

____ 10. A union is an employer association that bargains with workers over wages, benefits, and working conditions. Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 11. The deviation of unemployment from its natural rate is called a the unnatural rate of unemployment. . b structural unemployment. . c frictional unemployment. . d cyclical unemployment. .

____ 12. Cyclical unemployment refers to a the relationship between the probability of unemployment and a worker's changing level . of experience. b how often a worker is likely to be employed during her lifetime. . c year-to-year fluctuations of unemployment around its natural rate.

. d long-term trends in unemployment. .

____ 13. The designation "natural" implies that the natural rate of unemployment a is desirable. . b is constant over time. . c is impervious to economic policy. . d does not go away on its own even in the long run. .

____ 14. Egzon is working part-time. Dijana is on temporary layoff. Who is included in the Bureau of Labor Statistics employed category? a only Egzon . b only Dijana . c both Egzon and Dijana . d neither Egzon nor Dijana .

____ 15. Zeeman is a college student who is not working or looking for a job. The Bureau of Labor Statistics counts Zeeman as a unemployed and in the labor force. . b unemployed, but not in the labor force. . c in the labor force, but not unemployed. . d neither in the labor force nor unemployed. .

____ 16. If an unemployed person quits looking for work, then, other things the same, the unemployment rate a decreases and the labor-force participation rate is unaffected. . b and the labor-force participation rate both decrease. . c is unaffected and the labor-force participation rate decreases. . d and the labor-force participation rate are both unaffected. .

____ 17. The Bureau of Labor Statistics reported in 2005 that there were 28.19 million people over age 25 who had no high school degree or its equivalent, 11.73 million of whom were employed and 1.04 million of whom were unemployed. What were the labor-force participation rate and the unemployment rate for this group? a 41.6% and 3.7% . b 41.6% and 8.1% . c 45.3% and 3.7% . d 45.3% and 8.1% .

____ 18. Suppose some country had an adult population of about 46 million, a labor-force participation rate of 75 percent, and an unemployment rate of 8 percent. How many people were unemployed? a 2.54 million . b 2.76 million . c 3.68 million . d 8 million .

Table 28-3 2003 Labor Data for Adults (age 16 and older) in Meditor Males not in labor force Females not in labor force Males unemployed Females unemployed Males employed Females employed 45 million 35 million 5 million 5 million 85 million 65 million

____ 19. Refer to Table 28-3. What is the adult female unemployment rate in Meditor? a 4.8 percent . b 5 percent . c 7.1 percent . d 7.7 percent .

____ 20. The normal rate of unemployment around which the unemployment rate fluctuates is called a the normal rate of unemployment. . b the natural rate of unemployment. . c cyclical unemployment. . d fluctuating unemployment. .

____ 21. Some individuals would like to have a job, but they have given up looking for a job after an unsuccessful search. These individuals are called a unattached workers, and they are classified by the Bureau of Labor Statistics as . unemployed. b unattached workers, and they are not classified by the Bureau of Labor Statistics as . unemployed. c discouraged workers, and they are classified by the Bureau of Labor Statistics as . unemployed. d discouraged workers, and they are not classified by the Bureau of Labor Statistics as . unemployed.

____ 22. People who are unemployed because of job search are best classified as a cyclically unemployed. . b structurally unemployed. . c frictionally unemployed. . d discouraged workers. .

____ 23. Unemployment that exists because it takes time for workers to search for the jobs that suit them best is a frictional unemployment, which contributes to the natural rate of unemployment. . b frictional unemployment, which does not contribute to the natural rate of unemployment. . c structural unemployment, which contributes to the natural rate of unemployment. . d structural unemployment, which does not contribute to the natural rate of unemployment. .

____ 24. Jenna is searching for a job that suits her tastes about where to live and coworkers. Mary is looking for a job that makes best use of her skills. a Jenna and Mary are both frictionally unemployed. . b Jenna and Mary are both structurally unemployed.

. c Jenna is frictionally unemployed, and Mary is structurally unemployed. . d Jenna is structurally unemployed, and Mary is frictionally unemployed. .

____ 25. Of the following groups, who is eligible for unemployment insurance benefits? a the unemployed who quit their jobs . b the unemployed who were laid off because their previous employers no longer needed . their skills c the unemployed who were fired for cause . d the unemployed who just entered the labor force .

____ 26. Which of the following is correct? a Unemployment insurance raises structural unemployment because it reduces the job . search efforts of the unemployed. b Most economists are skeptical of the value of unemployment insurance primarily . because they believe that it results in a poorer match between workers and jobs. c Studies show that when the unemployed become ineligible for benefits, the probability of . their finding a job rises markedly. d All of the above are correct. .

____ 27. Which of the following is not correct? a Frictional unemployment results from the process of matching workers and jobs. . b Structural unemployment results when the number of jobs is insufficient for the number . of workers. c Minimum wages are the predominant reason for unemployment in the U.S. economy. . d When a minimum-wage law forces the wage to remain above the level that balances . supply and demand, it raises the quantity of labor supplied and reduces the quantity of labor demanded compared to the equilibrium level.

Figure 28-1

10 9 8 7 6 5 4 3 2 1

wage S

10

20

30

40

50

60

70

80

90

hundreds of workers

____ 28. Refer to Figure 28-1. If the government imposes a minimum wage of $4, then employment will decrease by a 0 workers. . b 2000 workers. . c 3000 workers. . d 4000 workers. .

____ 29. Economists have found that union workers earn what percent more than similar nonunion workers? a 0 to 5 . b 5 to 10 . c 10 to 20 . d 20 to 30 .

____ 30. When a union bargains successfully with employers, in that industry, a unemployment and wages increase. . b unemployment and wages decrease. . c unemployment decreases and wages increase. . d unemployment increases and wages decrease. .

____ 31. Unions contribute to a frictional but not structural unemployment.

. b structural but not frictional unemployment. . c both frictional and structural unemployment. . d neither frictional nor structural unemployment. .

____ 32. Which of the following is correct? a There is consensus among economists that unions are good for the economy. . b There is consensus among economists that unions are bad for the economy. . c There is consensus among economists that, on net, unions have almost no impact on . macroeconomic variables. d There is no consensus among economists about whether unions are good or bad for the . economy.

____ 33. Which of the following causes of unemployment is associated with a wage rate above the market equilibrium level? a minimum-wage laws . b unions . c efficiency wages . d All of the above are correct. .

____ 34. Unions a and firms paying wages above equilibrium to improve worker effort both create frictional . unemployment. b creates frictional unemployment, while firms paying wages above equilibrium to . improve worker effort creates structural unemployment. c creates structural unemployment, while firms paying wages above equilibrium to . improve worker effort creates frictional unemployment. d and firms paying wages above equilibrium to improve worker effort both create . structural unemployment.

Short Answer 35. The table below uses data for the year 2003 provided by the Bureau of Labor Statistics and adjusted to be comparable to U.S. data. All values are in thousands. Fill in the blank entries in the table.

Country

Adult Population

Labor Force

Employed

Unemployed

Unemployment Rate

Labor-Force Participation Rate

Japan France Germany

109,474 70,159 26,870 39,591

62,510

3,500 2,577 9.69

57.41

36. Why have labor-force participation rates for women in the United States increased since World War II while labor-force participation rates for men have decreased?

37. Most spells of unemployment are short, and most unemployment observed at any given time is long term. How can this be?

Macro Ch 15 Unemployment Answer Section

TRUE/FALSE 1. ANS: F PTS: 1 DIF: 1 REF: 28-0 NAT: Analytic LOC: The study of economics and definitions in economics TOP: Income | Standard of living MSC: Definitional 2. ANS: T NAT: Analytic MSC: Definitional 3. ANS: T NAT: Analytic MSC: Interpretive PTS: 1 DIF: 1 LOC: Unemployment and inflation PTS: 1 DIF: 2 LOC: Unemployment and inflation REF: 28-0 TOP: Natural rate of unemployment REF: 28-1 TOP: Unemployment REF: 28-1 MSC: Interpretive REF: 28-1 TOP: Bureau of Labor Statistics | U-3 REF: 28-1 TOP: Unemployment REF: 28-1 TOP: Unemployment | Job search REF: 28-2 TOP: Sectoral shifts | Unemployment REF: 28-3 TOP: Wages | Unemployment REF: 28-4 TOP: Unions

4. ANS: T PTS: 1 DIF: 2 NAT: Analytic LOC: Unemployment and inflation TOP: Bureau of Labor Statistics | U-1 | U-6 5. ANS: T NAT: Analytic MSC: Interpretive 6. ANS: F NAT: Analytic MSC: Definitional 7. ANS: T NAT: Analytic MSC: Definitional 8. ANS: T NAT: Analytic MSC: Definitional 9. ANS: F NAT: Analytic MSC: Interpretive 10. ANS: F NAT: Analytic MSC: Definitional MULTIPLE CHOICE PTS: 1 DIF: 2 LOC: Unemployment and inflation PTS: 1 DIF: 1 LOC: Unemployment and inflation PTS: 1 DIF: 1 LOC: Unemployment and inflation PTS: 1 DIF: 1 LOC: Unemployment and inflation PTS: 1 DIF: 2 LOC: Unemployment and inflation PTS: 1 DIF: 1 LOC: Labor markets

11. ANS: D NAT: Analytic MSC: Definitional 12. ANS: C NAT: Analytic MSC: Definitional 13. ANS: D NAT: Analytic MSC: Interpretive

PTS: 1 DIF: 1 LOC: Unemployment and inflation PTS: 1 DIF: 1 LOC: Unemployment and inflation PTS: 1 DIF: 2 LOC: Unemployment and inflation

REF: 28-0 TOP: Cyclical unemployment REF: 28-0 TOP: Cyclical unemployment REF: 28-0 TOP: Natural rate of unemployment

14. ANS: A PTS: 1 DIF: 2 REF: 28-1 NAT: Analytic LOC: The study of economics and definitions in economics TOP: Bureau of Labor Statistics | Employment MSC: Interpretive 15. ANS: D PTS: 1 DIF: 2 NAT: Analytic LOC: Unemployment and inflation TOP: Bureau of Labor Statistics | Unemployment | Labor force 16. ANS: B PTS: 1 DIF: 2 NAT: Analytic LOC: Unemployment and inflation TOP: Unemployment rate | Labor-force participation rate 17. ANS: D PTS: 1 DIF: 2 NAT: Analytic LOC: Unemployment and inflation TOP: Labor-force participation rate | Unemployment rate 18. ANS: B NAT: Analytic MSC: Analytical 19. ANS: C NAT: Analytic MSC: Applicative 20. ANS: B NAT: Analytic MSC: Definitional PTS: 1 DIF: 3 LOC: Unemployment and inflation PTS: 1 DIF: 2 LOC: Unemployment and inflation PTS: 1 DIF: 1 LOC: Unemployment and inflation REF: 28-1 MSC: Interpretive REF: 28-1 MSC: Interpretive REF: 28-1 MSC: Applicative REF: 28-1 TOP: Unemployment REF: 28-1 TOP: Unemployment rate REF: 28-1 TOP: Natural rate of unemployment REF: 28-1 MSC: Interpretive REF: 28-1 TOP: Frictional unemployment REF: 28-2

21. ANS: D PTS: 1 DIF: 2 NAT: Analytic LOC: Unemployment and inflation TOP: Bureau of Labor Statistics | Discouraged workers 22. ANS: C NAT: Analytic MSC: Interpretive 23. ANS: A NAT: Analytic PTS: 1 DIF: 2 LOC: Unemployment and inflation PTS: 1 DIF: 2 LOC: Unemployment and inflation

TOP: Frictional unemployment | Natural rate of unemployment MSC: Interpretive 24. ANS: A PTS: 1 DIF: 2 NAT: Analytic LOC: Unemployment and inflation TOP: Frictional unemployment | Structural unemployment 25. ANS: B NAT: Analytic MSC: Interpretive 26. ANS: C NAT: Analytic MSC: Interpretive 27. ANS: C NAT: Analytic MSC: Interpretive 28. ANS: A NAT: Analytic MSC: Applicative 29. ANS: C NAT: Analytic MSC: Definitional 30. ANS: A NAT: Analytic MSC: Interpretive 31. ANS: NAT: TOP: MSC: PTS: 1 DIF: 2 LOC: Unemployment and inflation PTS: 1 DIF: 2 LOC: Unemployment and inflation PTS: 1 DIF: 2 LOC: Unemployment and inflation PTS: 1 DIF: 2 LOC: Unemployment and inflation PTS: 1 DIF: 1 LOC: Labor markets PTS: 1 DIF: 2 LOC: Labor markets REF: 28-1 MSC: Interpretive REF: 28-2 TOP: Unemployment insurance REF: 28-2 TOP: Unemployment insurance REF: 28-3 TOP: Unemployment REF: 28-3 TOP: Employment | Minimum wage REF: 28-4 TOP: Economists | Unions | Wages REF: 28-4 TOP: Unions | Unemployment | Wages

B PTS: 1 DIF: 2 REF: 28-4 Analytic LOC: Unemployment and inflation Unions | Structural unemployment | Frictional unemployment Interpretive PTS: 1 DIF: 2 LOC: Labor markets PTS: 1 DIF: 2 LOC: Unemployment and inflation REF: 28-4 TOP: Economists | Unions REF: 28-5 TOP: Structural unemployment

32. ANS: D NAT: Analytic MSC: Interpretive 33. ANS: D NAT: Analytic MSC: Interpretive 34. ANS: NAT: TOP: MSC:

D PTS: 1 DIF: 2 REF: 28-5 Analytic LOC: Unemployment and inflation Efficiency wages | Unions | Frictional unemployment | Structural unemployment Interpretive

SHORT ANSWER

35. ANS:
Adult Population Labor Force Unemployment Rate Labor-Force Participation Rate

Country

Employed

Unemployed

Japan France Germany

109,474 46,804 70,159

66,010 26,870 39,591

62,510 24,293 35,755

3,500 2,577 3,836

5.30 9.59 9.69

60.30 57.41 56.43

PTS: 1 DIF: 2 LOC: Unemployment and inflation MSC: Applicative

REF: 28-1 NAT: Analytic TOP: Labor-force participation rate | Unemployment rate

36. ANS: Causes of the increase in the U.S. womens labor-force participation rate over the past several decades include new technologies that have reduced the amount of time required to complete routine household tasks, improved birth control, and changing political and social attitudes. Causes of the decline in the U.S. mens labor-force participation rate over the past several decades include young men now staying in school longer than their fathers and grandfathers did, older men now retiring earlier and living longer, and more fathers now staying at home to raise their children. PTS: 1 DIF: 2 REF: 28-1 LOC: The study of economics and definitions in economics MSC: Interpretive NAT: Analytic TOP: Labor-force participation rate

37. ANS: Most unemployed people in the economy are unemployed for relatively short periods of time, while fewer people are unemployed for relatively long periods of time. If you were to total the weeks spent unemployed, most of those weeks would be accounted for by people who had been unemployed a long time. PTS: 1 DIF: 2 LOC: Unemployment and inflation MSC: Interpretive REF: 28-1 NAT: Analytic TOP: Unemployment