PRACTICE TEST 16

(Bassam AbuAlFoul)

Chapter 16 Wages and Unemployment Part I: Multiple Choice. Choose the best answer for the following questions.
1. You work for a firm that wants to know what proportion of the population is in the labor force. You should examine: a. the unemployment rate. b. the full employment rate of unemployment. c. the labor force participation rate. d. the population participation rate. 2. The unemployment rate is equal to: a. the number of persons unemployed divided by the number employed. b. the number of persons unemployed divided by the number in the labor force. c. the number of persons unemployed divided by the population age 16 and over. d. the number of persons working divided by the population age 16 and over. 3. If a country's total population (age 16 and over) is 40 million, with 1 million unemployed and 24 million currently holding jobs, a. the unemployment rate is 2.5 percent, and the labor force participation rate is 60 percent. b. the unemployment rate is 4 percent, and the labor force participation rate is 60 percent. c. the unemployment rate is 4 percent, and the labor force participation rate is 62.5 percent. d. the unemployment rate is 4.2 percent, and the labor force participation rate is 96 percent. 4. In a monthly employment survey of 200,000 people, 74,600 are under age 16, in the armed forces, or institutionalized; 62,710 are employed; 4,192 are unemployed; and 58,438 are not in the labor force. These figures give an unemployment rate of ________ percent. a. 6.3 b. 6.7 c. 2.1 d. 3.3 5. Firms A, B, C, and D manufacture infant car seats. Due to a change in consumer preferences, A and B lay off workers, all of whom are needed by C and D to meet increased demand. But until the laid-off workers can find and agree to accept those jobs, they are _________ unemployed. a. cyclically b. structurally c. frictionally d. naturally 6. A ________ is a person who was employed in the civilian labor force and was either fired or laid off. a. new entrant b. reentrant c. job leaver d. job fixer e. none of the above 7. The answer is a person employed in the civilian labor force who quits his or her job. The question is: a. Who is a job loser? b. Who is an entrant? c. Who is a reentrant? d. Who is a job leaver? e. Who is a discouraged worker?

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8. Which of the following statements is false? a. A discouraged worker is counted as an unemployed worker. b. The frictional unemployment is greater than the natural employment rate. c. The natural unemployment rate is equal to the structural unemployment rate. d. All of the above are incorrect. e. b and c 9. The number of employed persons plus the number of unemployed persons equals the number of persons a. in the total population b. in the civilian noninstitutional population c. in the civilian labor force d. not in the labor force e. none of the above

10. The government of Enclosia enacts a minimum wage law that raises the wage above the equilibrium level. We would expect: a. an increase in unemployment. b. higher productivity, as workers who receive higher wages will work harder. c. a decrease in unemployment, as more people are now willing to work. c. cyclical unemployment to become more erratic. 11. The total population (age 16 and over) of Happy Land is 48 million. Of this total, 4 million are unemployed and 36 million currently hold jobs. What are the rates of unemployment and labor force participation of Happy Land? a. The rate of unemployment is 11 percent, and the rate of labor force participation is 83 percent. b. The rate of unemployment is 10 percent, and the rate of labor force participation is 75 percent. c. The rate of unemployment is 10 percent, and the rate of labor force participation is 83 percent. d. The rate of unemployment is 11 percent, and the rate of labor force participation is 90 percent. 12. Ahmed stops looking for work because he believes his prospects are so poor he is unlikely to find a job. The Bureau of Labor Statistics would classify Ahmed as: a. not in the labor force. b. on layoff. c. unemployed. d. employed as a household worker. 13. The natural rate of unemployment: a. is caused by cyclical business conditions. b. is the normal rate of unemployment around which the unemployment rate fluctuates. c. results from both frictional and cyclical economic conditions. d. is not present when the economy is at the peak of an economic boom. 14. Discouraged workers are: a. employees who are discouraged because their wages are low. b. persons laid off who are waiting to return to their previous position in the near future. c. persons who are actively seeking employment. d. not counted among the unemployed.

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15. The unemployment rate may NOT accurately reflect the true rate of unemployment because: a. some discouraged individuals cease looking for work. b. some individuals counted among the unemployed are working in the underground economy. c. in order to qualify for financial assistance, some individuals may say they are looking for work even though they would be reluctant to accept a job. d. all of the above.

Part II: Internet:

You are also encouraged to visit the web site for your textbook which is rich in learning resources and materials related to each chapter. In addition, you can test your knowledge with the online quizzes. The internet address was provided in the course syllabus. Here it is again: http://highered.mcgrawhill.com/sites/007712961x/student_view0/index.html

ANSWERS (For Part I):

1. c. the labor force participation rate. 2. b. the number of persons unemployed divided by the number in the labor force. 3. c. the unemployment rate is 4 percent, and the labor force participation rate is 62.5 percent. 4. a The unemployment rate = 4,192/(62,710 + 4,192). 5. c The time it takes to match job openings with qualified unemployed persons gives rise to frictional unemployment. 6. e The correct answer is job loser. 7. d A job leaver is a person who quits his or her job. 8. d All of the above are incorrect. 9. c The civilian labor force consists of unemployed persons plus employed persons. 10. a. an increase in unemployment. 11. c. The rate of unemployment is 10 percent, and the rate of labor force participation is 83 percent. 12. a. not in the labor force. 13. b. is the normal rate of unemployment around which the unemployment rate fluctuates. 14. d. not counted among the unemployed. 15. d. all of the above.

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