Chapter 26 Unemployment and Its Natural Rate

Test A
1

The natural rate of unemployment is a. zero percent. b. the rate associated with the highest possible level of GDP. c. created primarily by short-run fluctuations in real GDP. d. the amount of unemployment that the economy normally experiences. !"#$%& d. the amount of unemployment that the economy normally experiences. T'P$& ( )$'1& D "$*T+,!& +!T ,-.$*T+/$& 1 % !D,(& '
0

1nemployment data is collected a. from firms and unemployment insurance claims. b. through a regular survey of about 234333 households. c. from payroll data received for tax purposes. d. !one of the above is correct. !"#$%& b. through a regular survey of about 234333 households. T'P$& ( )$'1& D "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
5

#hich of the following people is counted as unemployed according to official statistics6 a. !ancy4 who is on temporary layoff b. Gary4 who has retired and is not loo7ing for wor7 c. -rian4 a full-time student who is not loo7ing for wor7 d. ll of the above are correct. !"#$%& a. !ancy4 who is on temporary layoff T'P$& ( )$'1& D "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
8

#ho would be included in the labor force6 a. 9olly4 an unpaid homema7er b. Dave4 who does not have a :ob4 but is loo7ing for wor7 c. -ruce4 a full-time student not loo7ing for wor7 d. !one of the above are included in the labor force. !"#$%& b. Dave4 who does not have a :ob4 but is loo7ing for wor7 T'P$& ( )$'1& D "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
;

The -<" recently reported that there were 8;.5= million college graduates over age 12. ,f this number 52.3= million were in the labor force and 5;.8= were employed. #hat was the labor-force participation rate and the unemployment rate for this group6 a. about >= percent and 1.5 percent b. about >?.; percent and 1.> percent c. about ?0 percent and 1.5 percent d. about ?= percent and 1.> percent !"#$%& b. about >?.; percent and 1.> percent. T'P$& ( )$'1& $ "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '

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5;

52 *hapter 02A1nemployment and +ts !atural %ate

2

)ay loses her :ob and decides to sit around home for a few months. *eteris paribus4 the unemployment rate a. increases4 and the labor-force participation rate decreases. b. increases4 and the labor-force participation rate is unaffected. c. increases4 and the labor-force participation rate increases. d. is unaffected4 and the labor-force participation rate increases. !"#$%& a. increases4 and the labor-force participation rate decreases. T'P$& ( )$'1& * "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
>

#hich of the following is correct6 a. Teenagers have lower labor-force participation rates and lower unemployment rates than do adults. b. Teenagers have lower labor-force participation rates and higher unemployment rates than do adults. c. Teenagers have higher labor-force participation rates and higher unemployment rates than do adults. d. Teenagers have higher labor-force participation rates and lower unemployment rates than do adults. !"#$%& b. Teenagers have lower labor-force participation rates and higher unemployment rates than do adults. T'P$& ( )$'1& D "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
=

.ust after #orld #ar ++4 the labor-force participation rate of women was a. about 5A; and currently is 1A0. b. about 1A0 and currently is about 5A;. c. about 1A5 and currently is about 5A;. d. about 1A8 and currently is about 0A5. !"#$%& c. about 1A5 and currently is about 5A;. T'P$& ( D+BB+*1<T'& 5 )$'1& D "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
?

"uppose that some people report themselves as unemployed when4 in fact4 they are wor7ing in the underground economy. +f these persons were counted as employed4 a. both the unemployment rate and labor-force participation rate would be higher. b. the unemployment rate would be higher and the labor-force participation rate would be unchanged. c. the unemployment rate would be lower and the labor-force participation rate would be unchanged. d. both the unemployment rate and labor-force participation rate would be lower. !"#$%& c. the unemployment rate would be lower and the labor-force participation rate would be unchanged. T'P$& ( )$'1& D "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
13

*hristine is loo7ing for wor7 as a financial analyst. lthough her prospects are good4 she hasnCt yet ta7en a :ob. Pam is loo7ing for wor7 in a furniture factory4 but there arenCt many furniture companies loo7ing for wor7ers and every time she shows up for an interview4 there are many more people than openings. a. *hristine is frictionally unemployed and Pam is structurally unemployed. b. *hristine is structurally unemployed and Pam is frictionally unemployed. c. *hristine and Pam are both frictionally unemployed. d. *hristine and Pam are both structurally unemployed. !"#$%& a. *hristine is frictionally unemployed and Pam is structurally unemployed. T'P$& ( )$'1& * "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
11

People who are unemployed because of :ob search are best classified as a. cyclically unemployed. b. discouraged wor7ers. c. frictionally unemployed. d. structurally unemployed. !"#$%& c. frictionally unemployed. T'P$& ( )$'1& D "$*T+,!& 0 ,-.$*T+/$& 0 % !D,(& '

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*hapter 02A1nemployment and +ts !atural %ate 5>

10

"ectoral shifts in the economy a. create structural unemployment. b. immediately reduce unemployment. c. on net leave unemployment unchanged. d. increase unemployment due to :ob search. !"#$%& d. increase unemployment due to :ob search. T'P$& ( )$'1& D "$*T+,!& 0 ,-.$*T+/$& 0 % !D,(& '
15

1nemployment insurance a. reduces :ob search unemployment. b. decreases the natural rate of unemployment. c. increases frictional unemployment. d. ll of the above are correct. !"#$%& c. increases frictional unemployment. T'P$& ( )$'1& D "$*T+,!& 0 ,-.$*T+/$& 0 % !D,(& '
18

typical merican wor7er covered by unemployment insurance receives a. 133 percent of their former wages for 02 wee7s. b. >; percent of their former wages for ;3 wee7s. c. ;3 percent of their former wages for 02 wee7s. d. 0; percent of their former wages for ;3 wee7s. !"#$%& c. ;3 percent of their former wages for 02 wee7s. T'P$& ( )$'1& D "$*T+,!& 0 ,-.$*T+/$& 0 % !D,(& '
1;

n increase in the world price of oil creates a sectoral shift that probably decreases unemployment4 and the decrease would be greater in a country with unemployment insurance than in one without. b. decreases unemployment4 but the decrease would be smaller in a country with unemployment insurance than in one without. c. increases unemployment4 and the increase would be greater in a country with unemployment insurance than in one without. d. increases unemployment4 but the increase would be smaller in a country with unemployment insurance than in one without. !"#$%& c. increases unemployment4 and the increase would be greater in a country with unemployment insurance than in one without. T'P$& ( )$'1& D "$*T+,!& 0 ,-.$*T+/$& 0 % !D,(& ' a.
12

(inimum wage laws a. probably reduce teenage employment. b. are probably the ma:or cause of natural unemployment. c. probably most adversely affect s7illed wor7ers. d. ll of the above are correct. !"#$%& a. probably reduce teenage employment. T'P$& ( )$'1& D "$*T+,!& 5 ,-.$*T+/$& 5 % !D,(& '
1>

-etween the 1?83s and today4 union membership a. fell from about 1A0 to 1A5 of the labor force. b. fell from about 1A5 to 1A2 of the labor force. c. rose from about 1A2 to 1A5 of the labor force. d. rose from about 1A5 to 1A0 of the labor force. !"#$%& b. fell from about 1A5 to 1A2 of the labor force. T'P$& ( )$'1& D "$*T+,!& 8 ,-.$*T+/$& 8 % !D,(& '

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5= *hapter 02A1nemployment and +ts !atural %ate

1=

#hen a union bargains successfully with an employer4 a. the Duantity of labor supplied increases but the Duantity of labor demanded decreases. b. the Duantity of labor supplied increases but the Duantity of labor demanded increases. c. both the Duantity of labor supplied and the Duantity of labor demanded increase. d. both the Duantity of labor supplied and the Duantity of labor demanded decrease. !"#$%& a. the Duantity of labor supplied increases but the Duantity of labor demanded decreases. T'P$& ( )$'1& D "$*T+,!& 8 ,-.$*T+/$& 8 % !D,(& '
1?

#hen unions raise wages in one sector of the economy4 the supply of labor in other sectors of the economy a. decreases4 raising wages in industries that are not unionized. b. decreases4 reducing wages in industries that are not unionized. c. increases4 raising wages in industries that are not unionized. d. increases4 reducing wages in industries that are not unionized. !"#$%& d. increases4 reducing wages in industries that are not unionized. T'P$& ( D+BB+*1<T'& 5 )$'1& D "$*T+,!& 8 ,-.$*T+/$& 8 % !D,(& '
03

%ight-to-wor7 laws a. prevent employers from hiring permanent replacements for wor7ers who are on stri7e. b. allows employers to replace wor7ers who are on stri7e. c. guarantee wor7ers the right to form unions. d. give wor7ers in a unionized firm the right to choose whether or not to :oin the union. !"#$%& d. give wor7ers in a unionized firm the right to choose whether to :oin the union. T'P$& ( )$'1& D "$*T+,!& 8 ,-.$*T+/$& 8 % !D,(& '
01

ngela is the newly appointed *$, of a company that manufactures computer chips on an assembly line. 9er staff has told her that given productivity numbers4 they suspect some wor7ers may be shir7ing. ccording to efficiency wage theory4 what should she do6 a. Pay all wor7ers more than the eDuilibrium wage rate. b. %eward those who shir7 with higher wages. c. Pay below the eDuilibrium wage rate to ma7e up for the loss from shir7ing. d. (a7e sure that wor7ers are getting paid exactly the eDuilibrium wage rate. !"#$%& a. Pay all wor7ers more than the eDuilibrium wage rate. T'P$& ( )$'1& * "$*T+,!& 8 ,-.$*T+/$& 8 % !D,(& '
00

$fficiency wages reduce a. the average Duality of :ob applicants. b. labor-force participation rates. c. the natural rate of unemployment. d. the incentive to shir7. !"#$%& d. the incentive to shir7. T'P$& ( )$'1& D "$*T+,!& ; ,-.$*T+/$& ; % !D,(& '
05

n efficient wage designed to ensure that Duality wor7ers are hired is designed principally to reduce a problem created by a. adverse selection4 but it also increases unemployment. b. adverse selection4 but it also decreases unemployment. c. moral hazard4 but it also increases unemployment. d. moral hazard4 but it also decreases unemployment. !"#$%& a. adverse selection4 but it also increases unemployment. T'P$& ( )$'1& * "$*T+,!& ; ,-.$*T+/$& ; % !D,(& '

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*hapter 02A1nemployment and +ts !atural %ate 5?

08

#hich of the following explanations of the natural rate of unemployment is most important for the 1.". economy6 a. :ob search b. minimum wage laws c. unions d. $conomists have not determined the answer to this Duestion. !"#$%& d. $conomists have not determined the answer to this Duestion. T'P$& ( )$'1& D "$*T+,!& 2 ,-.$*T+/$& 8 % !D,(& '
0;

9enry Bord paid his wor7ers E;.33 per day to a. meet union demands. b. prevent his wor7ers from unionizing. c. protest minimum wage laws. d. increase wor7er productivity. !"#$%& d. increase wor7er productivity. T'P$& ( )$'1& D "$*T+,!& 2 ,-.$*T+/$& 8 % !D,(& '

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!"#$%& d. the amount of unemployment that the economy normally experiences. T'P$& ( )$'1& D "$*T+,!& +!T ,-.$*T+/$& 1 % !D,(& '
0

!"#$%& b. through a regular survey of about 234333 households. T'P$& ( )$'1& D "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
5

!"#$%& a. !ancy4 who is on temporary layoff T'P$& ( )$'1& D "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
8

!"#$%& b. Dave4 who does not have a :ob4 but is loo7ing for wor7 T'P$& ( )$'1& D "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
;

!"#$%& b. about >?.; percent and 1.> percent. T'P$& ( )$'1& $ "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
2

!"#$%& a. increases4 and the labor-force participation rate decreases. T'P$& ( )$'1& * "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
>

!"#$%& b. Teenagers have lower labor-force participation rates and higher unemployment rates than do adults. T'P$& ( )$'1& D "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
=

!"#$%& c. about 1A5 and currently is about 5A;. T'P$& ( D+BB+*1<T'& 5 )$'1& D "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
?

!"#$%& c. the unemployment rate would be lower and the labor-force participation rate would be unchanged. T'P$& ( )$'1& D "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
13

!"#$%& a. *hristine is frictionally unemployed and Pam is structurally unemployed. T'P$& ( )$'1& * "$*T+,!& 1 ,-.$*T+/$& 1 % !D,(& '
11

!"#$%& c. frictionally unemployed. T'P$& ( )$'1& D "$*T+,!& 0 ,-.$*T+/$& 0 % !D,(& '

10

!"#$%& d. increase unemployment due to :ob search. T'P$& ( )$'1& D "$*T+,!& 0 ,-.$*T+/$& 0 % !D,(& '
15

!"#$%& c. increases frictional unemployment. T'P$& ( )$'1& D "$*T+,!& 0 ,-.$*T+/$& 0 % !D,(& '
18

!"#$%& c. ;3 percent of their former wages for 02 wee7s. T'P$& ( )$'1& D "$*T+,!& 0 ,-.$*T+/$& 0 % !D,(& '

1;

!"#$%& c. increases unemployment4 and the increase would be greater in a country with unemployment insurance than in one without. T'P$& ( )$'1& D "$*T+,!& 0 ,-.$*T+/$& 0 % !D,(& '
12

!"#$%& a. probably reduce teenage employment. T'P$& ( )$'1& D "$*T+,!& 5 ,-.$*T+/$& 5 % !D,(& '
1>

!"#$%& b. fell from about 1A5 to 1A2 of the labor force. T'P$& ( )$'1& D "$*T+,!& 8 ,-.$*T+/$& 8 % !D,(& '
1=

!"#$%& a. the Duantity of labor supplied increases but the Duantity of labor demanded decreases. T'P$& ( )$'1& D "$*T+,!& 8 ,-.$*T+/$& 8 % !D,(& '
1?

!"#$%& d. increases4 reducing wages in industries that are not unionized. T'P$& ( D+BB+*1<T'& 5 )$'1& D "$*T+,!& 8 ,-.$*T+/$& 8 % !D,(& '
03

!"#$%& d. give wor7ers in a unionized firm the right to choose whether to :oin the union. T'P$& ( )$'1& D "$*T+,!& 8 ,-.$*T+/$& 8 % !D,(& '
01

!"#$%& a. Pay all wor7ers more than the eDuilibrium wage rate. T'P$& ( )$'1& * "$*T+,!& 8 ,-.$*T+/$& 8 % !D,(& '
00

!"#$%& d. the incentive to shir7. T'P$& ( )$'1& D "$*T+,!& ; ,-.$*T+/$& ; % !D,(& '
05

!"#$%& a. adverse selection4 but it also increases unemployment. T'P$& ( )$'1& * "$*T+,!& ; ,-.$*T+/$& ; % !D,(& '
08

!"#$%& d. $conomists have not determined the answer to this Duestion. T'P$& ( )$'1& D "$*T+,!& 2 ,-.$*T+/$& 8 % !D,(& '
0;

!"#$%& d. increase wor7er productivity. T'P$& ( )$'1& D "$*T+,!& 2 ,-.$*T+/$& 8 % !D,(& '