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Eco ch 10

During periods of recession:
A. unemployment is more common.
Unemployment rates tend to be highest during:
A. periods of recession.
Unemployment:
A. exists at any time during the business cycle.
Unemployment occurs:
A. for a variety of reasons.

B. regionally when businesses or factories close.

C. nationally when a recession hits.

D. All of these are true.

Policies designed to protect workers:
A. include minimum wage laws.

B. include unionization laws.

C. can lead to unemployment.

D. All of these are true.

One consequence of unemployment is that:
A. some productive potential of the economy is being wasted.

B. the time and skills of the unemployed are not being put to use.

C. it can create uncertainty about the future.

D. All of these are consequences of unemployment

Unemployment:
A. changes primarily because of macroeconomic forces.

B. can have serious social consequences.

C. can create uncertainty about the future.

D. All of these are true.

Unemployment occurs when someone:
A. wants to work but cannot find a job.
The government office in charge of collecting official employment statistics is the:
A. Bureau of Labor Statistics.
In the United States, the working-age population refers to
A. the civilian, noninstitutional population aged 16 and over.
In the United States, the working population does not include:
A. anyone in the military.
In the United States, the working population does not include:
A. anyone in prison.

B. anyone in the military.

C. anyone less than 16 years old.

D. All of these are true

In the United States, to count as unemployed, you must:
B. want to work.
The labor force excludes:
A. those younger than age 16 years old.

B. those who don’t want to work.

C. those who are disabled and can’t work.

D. The labor force excludes all of these.

The labor force consists of people in the working-age population who are:
A. either employed or unemployed.

B. currently working or who would like to work and are actively trying to find a job.

C. not retired, a full-time student, or stay-at-home parent.

D. All of these are true.

The unemployment rate:
A. is measured by the number of people who are unemployed divided by the labor force.

B. is never zero.

C. measures what percentage of our population is currently looking for a job and can’t find one.

D. All of these are true.

The unemployment rate tells us:
A. what percentage of the labor force wants to work and can’t find a job.
The unemployment rate:
A. tells us what percentage of the labor force want to work and can’t find a job.

B. cannot tell us who is being affected.

C. cannot tell us how to solve the problem of unemployment.

D. All of these are true.

In general, the unemployment rate varies greatly by:
A. educational status.

B. gender.

C. age.

D. All of these are true.

On average, younger people have:
A. higher unemployment rates than older people.
People with less education are:
A. more likely to be unemployed than people with more education
The labor force participation rate:
A. is measured by the labor force divided by the working-age population.

B. tells us what fraction of the working-age population wants to be working.

C. typically falls during periods of recession.

D. All of these are true.

Economists report changes in unemployment in:
A. percentage points, not percentages.
The labor force participation rate
A. tells us what fraction of the working-age population wants to be working, whether or not they actually have a job.
During times of recession, the labor force participation rate typically:
C. falls, as more people give up and stop looking for work
Some people drop out of the labor force during times of recession:
A. to go back to college, because the opportunity cost is lower during a recession.

B. because they cannot find work and give up trying.

C. and decide to take early retirement.

D. All of these are true.

In 2011, the labor force participation rate was 64 percent. This means that:
A. 64 percent of all working age people wanted a job.
The unemployment rate may:
A. understate the effect of a recession on employment because some leave the labor force.
If you hear that unemployment increased in the last year by 3.5 percentage points to 8 percent it means:
B. 35 out of every 1,000 people lost their job in the last year.
If you hear that unemployment decreased by 2 percentage points to 6 percent in the past year, while the labor force participation rate remained constant, it means:
B. 20 out of every 1,000 unemployed persons found a job in the last year.
If you hear that unemployment increased by 2 percentage points to 4 percent in the past year, while the labor force participation rate and the population remained constant, it means:
A. unemployment doubled in the past year.

B. there was a 100 percent increase in unemployment.

C. twice as many people are without work than was the case a year ago.

D. All of these are true.

Discouraged workers are people who have:
A. looked for work in the past year but have given up looking because of the condition of the labor market.
Someone who is underemployed is someone who:
A. is working part-time, but wants full-time employment.

B. is working in a job for which they are overqualified.

C. could be contributing more output to society by either working more, or working using more advanced skills they possess but don’t currently use.

D. All of these describe those who are underemployed.

Matt is a college graduate who majored in creative writing and currently works at a local bookstore as a sales clerk. The best way to describe Matt is to say he is:
C. underemployed.
Jen has a PhD in economics and has been working for 3 years part-time as an instructor; she has always hoped to be hired as a full-time faculty member. The best way to describe Jen is to say she is:
C. underemployed.
Marc is a high school graduate and currently works as a corrections officer at a local prison. He would like to go back to school to train to become a police officer someday. The best way to describe Marc is to say he is:
D. employed.
John earned a PhD in biomedical engineering, and works full-time as a faculty member at the local university. He also does some private consulting work on the side. He would like to give up teaching and do consulting full-time, but he fears there isn’t enough demand for it. The best way to describe John is to say he is:
D. employed.
Sonia has a PhD in art history, and is currently working full-time as a waitress. The Bureau of Labor Statistics would count Sonia as:
A. employed.
Sasha has a master’s degree in writing, and currently works full-time as a 2nd grade classroom helper. She submits articles for the local paper on occasion, and gets paid only when the editor agrees to publish a submission. Sasha would love to be a full-time reporter. The best way to describe Sasha is to say she is ________________; the Bureau of Labor Statistics would count Sasha as ____________.
A. underemployed; employed
The Bureau of Labor Statistics counts underemployed persons as those who:
A. are currently working less than they would like to be.
The Bureau of Labor Statistics collects _______ measures of unemployment
C. 6
The Bureau of Labor Statistics measures unemployment by surveying:
B. a sample of about 60,000 households every month.
The survey the Bureau of Labor Statistics uses to collect unemployment data is called the:
A. current population survey.
The labor demand curve:
A. shows the relationship between the total quantity of labor demanded by all the firms in the economy and the wage rate.

B. shows that, all things being equal, firms will want to hire more labor when wages are lower and less labor when wages are higher.

C. has a negative slope.

D. All of these are true.

The labor demand curve:
A. is provided by firms who want to hire workers at each given wage
The labor supply curve:
B. is made up of workers who want to work for firms at each given wage
The labor supply curve:
A. shows the relationship between the total quantity of labor supplied by all workers in the economy and the wage rate.

B. shows that, all things being equal, more workers will want to work when wages are higher and less will want to work when wages are lower.

C. has a positive slope.

D. All of these are true.

If we wanted to describe unemployment in terms of supply and demand, we could say:
A. there is a surplus of labor.
The equilibrium price of labor is called:
A. the wage.
When the prevailing market wage is above equilibrium, we say:
A. there is unemployment.

B. there is a surplus of labor.

C. the quantity of labor demanded is less than the quantity supplied.

D. All of these are true.

When the prevailing market wage is above equilibrium:
A. the surplus of labor is the amount of unemployment in the market.

B. the difference between the quantity supplied and the quantity of labor demanded is unemployment.

C. unemployment occurs.

D. All of these are true.

The normal level of unemployment that persists in an economy in the long run:
A. is called the natural rate of unemployment.

B. is called the equilibrium rate of unemployment.

C. is never zero.

D. All of these are true.

The natural rate of unemployment:
B. is the normal level of unemployment that persists in an economy in the long run.
Which type of unemployment leads to a natural rate of unemployment above zero?
B. Frictional unemployment
Which type of unemployment contributes to the natural rate of unemployment?
A. Frictional

B. Structural

C. Real-wage

D. All of these contribute to the natural rate.

Which type of unemployment contributes to the natural rate of unemployment?
A. Real-wage unemployment
Frictional unemployment:
B. is unemployment caused by workers who are changing their location, job, or career.
Structural unemployment:
A. is unemployment that results from a mismatch between the skills workers can offer and the skills that are in demand.
Real-wage unemployment:
C. is the effect of wages remaining persistently above the market-clearing level.
Johnny has been working in a sandwich shop full-time while he attends college. When he graduates, he quits the sandwich shop and begins to search for full-time employment related to his college degree. Johnny would be considered:
A. frictionally unemployed.
Jake just quit his job as a shoe salesman and is looking for work as an accountant, which is what his college degree is in. Jake would be considered:
A. frictionally unemployed.
Sue just quit her job as a librarian to pursue her lifelong dream of getting a job as a teacher. Sue would be considered:
A. frictionally unemployed.
Bob just graduated from college and has just landed his first job with a local accounting firm that will start in three months. Bob plans to use that time to find a place to live, and adjust to the new area. Bob would be considered:
D. Bob is not in the labor force.
Carol is a coal miner who just got laid off when the last coal mine in the area was shut down. She has looked everywhere for another job as a miner, but cannot find one. Given that Carol is unlikely to find another job as a miner, she would be considered
B. structurally unemployed.
Sonia was a great bookkeeper 20 years ago, then left the workforce to stay home and raise her children. Now that they’re in college, Sonia looks for another bookkeeping job, but they all require computer skills that she doesn’t have. Sonia would be considered:
B. structurally unemployed.
Don worked as a machinist all his life, and was recently laid off because his plant closed and the jobs were outsourced to India. There don’t seem to be any machinist jobs in the area anymore. Don would be considered:
B. structurally unemployed.
Sarah used to be a music teacher at a local school, but got let go last year due to budget cuts. Sarah now works part-time as a waitress while looking for another teaching job. Sarah would be considered:
B. underemployed.
Fred was working as a sales rep for a firm, and just completed an MBA by taking courses at night. Fred quits his job to pursue a management position. Fred would be considered:
B. frictionally unemployed.
One way for governments to try and minimize the effects of structural unemployment is to:
A. provide information to unemployed people about which professions are experiencing rising demand for labor.

B. subsidize retraining programs for unemployed workers to learn new skills.

C. offer low-interest loans to unemployed workers to go back to school to learn new skills.

D. All of these are ways the government can deal with structural unemployment.

One way for governments to try and minimize the effects of structural unemployment is to:
A. subsidize retraining programs.
When governments provide information to unemployed people about which professions are experiencing rising demand for labor, they are trying to minimize the effects of which kind of unemployment?
B. Structural unemployment
When governments subsidize retraining programs for unemployed workers to learn new skills, they are trying to minimize the effects of which kind of unemployment?
B. Structural
Real-wage unemployment can be caused by which of the following?
A. Minimum wage laws
Classical unemployment can be caused by which of the following?
A. Minimum wage laws

B. Bargaining by unions

C. Efficiency wages

D. All of these create classical unemployment.

The economy goes through ups and downs over time:
A. which are reflected by changes in GDP growth.

B. and economists call this pattern the business cycle.

C. which affect the demand for labor.

D. All of these are true.

The business cycle matters for unemployment because
A. it affects the demand for labor.
When the economy is going strong:
A. the demand for workers increases.
When the economy is going strong:
A. firms expand their operations.

B. demand for workers increases.

C. GDP growth is positive.

D. All of these are true.

When the economy slows down:
C. the demand for workers decreases.
When the economy slows down:
A. firms contract their operations.

B. demand for workers decreases.

C. GDP growth is slowing or negative.

D. All of these are true.

Cyclical unemployment:
A. is unemployment caused by short-term economic fluctuations reflected in GDP growth.
An economic slow-down would cause the:
A. labor demand curve to shift left.
If GDP growth were to increase, it would cause the:
B. labor demand curve to shift right.
An economic slow-down predicts the new equilibrium wage would be:
A. lower because the labor demand curve shifts left.
An economic boom predicts the new equilibrium wage would be:
D. higher because the labor demand curve shifts right.
We don’t typically see wages __________ in response to an economic downturn because ____________.
C. fall; they are “sticky” and are slow to respond to shifts in the economy
We don’t typically see wages __________ in response to an economic upswing because ____________.
A. rise; they are “sticky,” and are slow to respond to shifts in the economy
The degree of wage stickiness in the real world:
A. has been measured by economists.

B. is widely agreed upon by economists.

C. has been addressed by policymakers.

D. None of these is true.

The degree of wage stickiness in the real world:
A. is controversial, even among economists.
When economists say wages are “sticky,” they mean that they:
A. are slow to adjust to changes in the economy, and can cause unemployment
Wages tend to be “sticky” because:
A. contracts are often negotiated for long terms and cannot be easily changed.

B. workers are less likely to work as hard if their pay may be cut due to market performance and not their performance.

C. constantly changing wages creates uncertainty and costs the employer a lot of time and energy to change wage rates.

D. All of these are possible reasons why wages might be sticky.

The result of wage stickiness in an economic downturn is that:
A. actual wages are temporarily above the market-clearing level.

B. it causes cyclical unemployment.

C. it causes a surplus of labor.

D. All of these are true.

When the economy swings back toward the boom part of a business cycle:
A. labor demand will increase.

B. cyclical unemployment will decrease.

C. actual wages will approach the market-clearing level.

D. All of these are true.

Unemployment is a:
D. lagging indicator, because it follows the business cycle.
When growth goes down, unemployment tends to go:
A. up shortly after, and vice versa.
Unemployment is a lagging indicator because:
A. employers wait to see how bad a recession looks before making the difficult decision to lay off workers.

B. employers wait to see how solid a recovery looks before committing to take on new employees.

C. firms may first try to decrease or increase the hours of existing employees before changing levels of employment.

D. All of these are reasons that make unemployment a lagging indicator.

With what measure does cyclical unemployment tend to move?
A. Per capita GDP growth rate
In the United States, the federal minimum wage in early 2013 is:
A. $7.25 per hour.
Supporters of minimum-wage legislation argue that:
A. workers deserve a basic standard of living.

B. it would not be fair to allow firms to pay workers a wage that would leave them struggling to escape poverty.

C. a worker earning minimum wage should be able to live above the poverty line.

D. All of these are true.

Supporters of minimum-wage legislation argue that:
A. workers deserve a basic standard of living.
Those who oppose minimum wage legislation argue that:
A. setting a wage above the market-clearing equilibrium creates unemployment
Why don’t wages fall so that everyone with the skills and desire gets a job?
A. The government might prevent it, through minimum-wage legislation.

B. Labor unions might prevent it, through bargaining backed by the threat to strike.

C. Firms themselves might prevent it, by voluntarily choosing to pay higher wages than necessary.

D. All of these are reasons why wages may not fall to equilibrium.

If the minimum wage is set at a level below the equilibrium wage:
A. it will have no effect.

B. it would be a nonbinding minimum wage.

C. it would not interfere with the market reaching equilibrium.

D. All of these are true.

If the minimum wage is set at a level above the equilibrium wage:
C. it could cause unemployment.
Does minimum wage cause unemployment?
A. Theoretically, yes.

B. Economists have found evidence that it does cause small amounts of unemployment in certain industries.

C. Economists have found evidence that shows it does not impact unemployment levels in an industry like fast food.

D. All of these are true.

Some economists argue that the minimum wage:
A. drives some labor to occur “under the table.”

B. causes some employers to hire undocumented migrants at below-minimum wages.

C. leads some employers to pay workers cash without telling the government.

D. All of these are true.

If minimum wage legislation does cause unemployment, then:
A. those who are lucky enough to land jobs benefit.

B. those who become unemployed as a result lose.

C. firms will not bear the entire burden of the higher cost of employment.

D. All of these are true.

If minimum wage legislation does not cause unemployment, then:
A. those who work for minimum wage will benefit.

B. firms will lose by earning lower profits.

C. minimum wages may be nonbinding.

D. All of these are true.

Labor unions are:
A. groups of employees who join together to bargain with their employer(s) over salaries and work conditions.
In the 1950s, about _________ of U.S. workers were in unions.
A. one third
The number of U.S. workers in unions today is:
A. far lower than it was in the 1950s.

B. about 12 percent of all wage and salary workers.

C. just under 15 million Americans.

D. All of these are true.

The number of U.S. workers in unions today is:
C. just under 15 million Americans.
The employer who has the most unionized workers:
A. is the government.
The biggest benefit to members of a union is:
A. being able to bargain as a group.
What does the existence of labor unions mean for the labor market and for unemployment?
A. Wage rates could rise above equilibrium level.
There is evidence that the presence of unions in a labor market:
A. can push wages up for non-union wage earners in the same market.
The role of unions is:
A. unnecessary if the market does a good job of determining fair wages.
Efficiency wages are:
A. wages deliberately set above the market rate in order to increase productivity.

B. a cause of unemployment.

C. an incentive for an employee to work hard to keep his job.

D. All of these are true.

Employers choose to offer efficiency wages because
A. they give employees an incentive to work hard to keep their jobs.

B. it will reduce turnover, saving the employer time and money to hire and train new workers.

C. it has proven to make workers more productive.

D. All of these are true.

It is generally more profitable for a firm to pay workers more than the going wage rate:
A. in sectors where skills are scarce.

B. in industries in which worker motivation really matters.

C. in areas in which turnover is very costly.

D. All of these are true.

Henry Ford is famous for instituting:
B. efficiency wages in an effort to reduce worker absenteeism.
The amount of unemployment caused by efficiency wages:
D. has little clear evidence as of yet.
Unemployment insurance is:
A. money that is paid by the government to people who are unemployed.
Unemployment insurance is:
A. offered by the government as a way to affect the level of frictional unemployment.

B. offered by the government as a way to affect the level of structural unemployment.

C. money that is paid by the government to people who are unemployed.

D. All of these are true.

Unemployment insurance:
A. is not an explanation for why wages do not reach equilibrium.

B. can affect how quickly people find jobs.

C. will affect the natural rate of unemployment.

D. All of these are true.

Unemployment insurance could affect unemployment:
A. by increasing the equilibrium level of unemployment.

B. by decreasing the amount of frictional unemployment.

C. by changing the incentives of those unemployed and looking for work.

D. All of these are true.

Giving people income through unemployment insurance:
A. allows people to prolong their unemployment until they find a better match.

B. reduces frictional employment because people find good matches, and change jobs less often.

C. creates two opposite effects on unemployment.

D. All of these are true.

Unemployment insurance:
A. varies widely across countries.
Unemployment insurance:
B. varies widely across countries.
We would expect, all else equal, that:
A. lower taxes would reduce unemployment.
Economists believe that lower taxes should reduce unemployment because:
A. people have more incentive to find a job, knowing they will keep more of the income they earn from the job when taxes are low.
The magnitude of the impact taxes have on job-search effort:
A. is inconclusive.
We would expect that policies to protect workers would:
A. lead to greater unemployment.
An example of a policy that affects the level of unemployment is:
A. minimum wage law.

B. unemployment insurance.

C. at-will employment policies.

D. All of these can affect the level of unemployment.

Policies that make it more difficult to fire an employee are likely to:
A. lead to greater unemployment.
Policies that make it more difficult to fire an employee are likely to:
A. lead to greater unemployment, because employers will be more hesitant to hire someone.
The trade-offs in the effect of unemployment insurance are:
A. it prolongs the job search, but reduces the number of job searches a person has to make.

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