Chapter 9 Homework

structural unemployment

Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of available jobs. For​ example, many people who were highly skilled at​ hand-drawn animation became unemployed as​ computer-generated, three-dimensional animation became the industry standard. To become employed​ again, these animators either learned the new animation methods or found employment in other industries after lengthy retraining periods. Structural unemployment can last longer than frictional unemployment because workers need time to develop new skills.

efficiency wage

A​ higher-than-market wage that a firm pays to increase worker productivity. Many studies have shown that higher wages motivate people to work harder. Efficiency wages are set higher than the market equilibrium not because of government regulation or unionization of the​ workforce, but instead as a​ productivity, loyalty, and motivation tool. By paying an efficiency wage to​ workers, the firm raises the cost of losing their jobs because most alternative jobs only pay the market wage. As a​ result, job turnover falls as do the costs associated with hiring and training new employees.

Which of the following is the correct formula for calculating the unemployment​ rate? A. Labor force/Working−age population×100 B. Number of unemployed/Labor force×100 C. Both of the formulas are used to calculate the unemployment rate. D. Neither formula is used to calculate the unemployment rate.

B. Number of unemployed/Labor force×100

unemployed

A person is considered unemployed if he or she is actively seeking​ work, but not yet working. If a person is not working and is not seeking​ work, then that person is considered not in the labor force.

According to​ Costco's CEO, Jim​ Sinegal: ​"Paying good wages and keeping your people working for you is good business...Imagine that you have​ 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for​ you." ​Sources: Alan B. Goldberg and Bill​ Ritter, "Costco CEO Finds​ Pro-Worker Means​ Profitability," ABCnews.com​, Aug.​ 2, 2006; Lori​ Montgomery, "Maverick CEO Joins Push to Increase Minimum​ Wage," Washington Post​, Jan.​ 30, 2007. What is​ Costco's CEO referring​ to? A. Efficiency wages B. Marketing strategies C. Union contracts D. Structural unemployment

A. Efficiency wages Efficiency​ wage: A​ higher-than-market wage that a firm pays to increase worker productivity. Many studies have shown that higher wages motivate people to work harder. Efficiency wages are set higher than the market equilibrium not because of government regulation or unionization of the​ workforce, but instead as a​ productivity, loyalty, and motivation tool. By paying an efficiency wage to​ workers, the firm raises the cost of losing their jobs because most alternative jobs only pay the market wage. As a​ result, job turnover falls as do the costs associated with hiring and training new employees.

Suppose John Q. Worker is currently unemployed. Each​ day, John Q. Worker spends the entire day searching available job openings for an appropriate position given his set of​ skills, abilities, and interests. If someone asks John Q. what he does for​ work, he tells them that he is currently​ "in-between jobs." Which of the following best classifies John​ Q.'s unemployment​ status? A. Frictionally unemployed B. Cyclically unemployed C. Structurally unemployed D. Seasonally unemployed

A. Frictionally unemployed Frictional Unemployment ​Short-term unemployment that arises from the process of matching workers with jobs. Most workers spend time involved in job​ searches, just as most firms spend at least time searching for the best person for a job opening. Frictional unemployment is​ short-term unemployment that arises from the process of looking for a job. The process takes​ time, so there will always be some workers who are frictionally unemployed because they are between jobs and in the process of finding new ones.

How does the U.S. economy create and destroy millions of jobs each​ year? ​(Mark all that​ apply.) A. In the market​ system, new firms are constantly entering and exiting various industries. B. When unemployment is​ high, the federal government hires more workers to offset the effects of unemployment. C. The federal government determines that certain industries are obsolete and closes firms. D. Some businesses are​ expanding, while others are contracting.

A. In the market​ system, new firms are constantly entering and exiting various industries. D. Some businesses are​ expanding, while others are contracting. The U.S. economy creates and destroys millions of jobs each year. This is not surprising in a vibrant market system where new firms are constantly being​ started, some existing firms are​ expanding, some existing firms are​ contracting, and some firms are going out of business. Each​ month, when the BLS announces the increases or the decreases in the number of persons employed and​ unemployed, these are net figures. That​ is, the change in the number of persons employed is equal to the number of jobs created minus the number of jobs eliminated. The U.S. economy creates and destroys millions of jobs each year. This is not surprising in a vibrant market system where new firms are constantly being​ started, some existing firms are​ expanding, some existing firms are​ contracting, and some firms are going out of business. Each​ month, when the BLS announces the increases or the decreases in the number of persons employed and​ unemployed, these are net figures. That​ is, the change in the number of persons employed is equal to the number of jobs created minus the number of jobs eliminated.

Suppose that Sally J. Society recently lost her job as an underwater welder. In looking for a new​ job, she discovers that the only available jobs are for economists and that there are no openings for underwater welders because the trade is now obsolete. If Sally J. Society decides to return to school to earn an Economics​ degree, what is the best classification of her unemployment​ status? A. Structurally unemployed B. Cyclically unemployed C. Frictionally unemployed D. Seasonally unemployed

A. Structurally unemployed Structural Unemployment Unemployment arising from a persistent mismatch between the skills and characteristics of workers and the requirements of available jobs. For​ example, many people who were highly skilled at​ hand-drawn animation became unemployed as​ computer-generated, three-dimensional animation became the industry standard. To become employed​ again, these animators either learned the new animation methods or found employment in other industries after lengthy retraining periods. Structural unemployment can last longer than frictional unemployment because workers need time to develop new skills.

When compared to the Great​ Depression, the typical length of unemployment in the modern​ (post-Great Depression-era) U.S. economy is A. significantly longer. B. relatively brief. C. approximately the same. D. slightly longer.

B. relatively brief. During the Great Depression of the​ 1930s, some people were unemployed for years at a time. In the modern U.S.​ economy, a typical unemployed person stays unemployed for a relatively brief period of​ time, although that time lengthens significantly during a severe recession. For​ example, when the economy was expanding in early​ 2007, fewer than 20 percent of the unemployed had been jobless for more than six months. By the end of the​ 2007-2009 recession,​ though, half of the unemployed had been jobless for more than six months.

Which of the following formulas does the Bureau of Labor Statistics use to calculate the unemployment​ rate? A. Number of unemployed/Working−age population×100. B. Number in labor force/Number of unemployed×100. C. Number of unemployed/Number in labor force×100. D. Number of unemployed/Number of employed x 100

C. Number of unemployed/Number in labor force×100. The Bureau of Labor Statistics​ (BLS) uses the Current Population Survey to collect the data needed to compute the unemployment rate. Labor​ Force: The sum of employed and unemployed workers in the economy. Unemployment​ Rate: The percentage of the labor force that is unemployed calculated using the following​ formula: Number of unemployed/Number in labor force×100. ​Unemployed: A person is considered unemployed if he or she is actively seeking​ work, but not yet working. If a person is not working and is not seeking​ work, then that person is considered not in the labor force.

Suppose that you are available to go to work but have not looked for a job for at least the last four weeks because you believe that there​ aren't any jobs available. You would be counted as A. part of the labor force. B. underemployed. C. a discouraged worker. D. unemployed.

C. a discouraged worker.

When the economy is at full​ employment, A. the natural rate of unemployment prevails. B. all remaining unemployment is either frictional or structural. C. the unemployment rate is greater than zero. D. All of the above.

D. All of the above. Natural rate of unemployment The normal rate of​ unemployment, consisting of frictional unemployment plus structural unemployment. When the economy moves through the expansionary phase of the business​ cycle, cyclical unemployment will drop to zero and the economy is said to be in full employment. That​ is, the economy is at full employment when the only remaining unemployment is either frictional or structural. Economists consider frictional and structural unemployment to be the​ normal, underlying level of unemployment in the economy. This normal level of unemployment is called the natural rate of unemployment.

In April​ 2019, the​ working-age population of the United States was 258.7 million. The​ working-age population is divided into those in the labor force​ (162.5 million) and those not in the labor force​ (96.2 million). The labor force is divided into the employed​ (156.6 million) and the unemployed​ (5.8 million). Those not in the labor force are divided into those not available for work​ (91.3 million) and those available for work​ (4.9 million).​ Finally, those available for work but not in the labor force are divided into discouraged workers​ (0.5 million) and those currently not working for other reasons​ (4.4 million). Use this data to help determine which one of the following statements is​ true: A. The unemployment rate is 5.8 million/162.5 million×100=3.6%. B. The labor force participation rate is 162.5 million/258.7 million×100=62.8%. C. The labor force is 258.7 million. D. Both A and B above are true.

D. Both A and B above are true. The unemployment rate is (Number of unemployed/Labor force)×100=Unemployment rate. Using the values shown in the​ figure, unemployment rate is 5.8 million/162.5 million×100=3.6%. The labor force participation rate is (Labor force/Working−age population)×100=Labor force participation rate. Using the values shown in the figure brings 162.5 million/258.7 million×100=62.8%.

What effect do labor unions have on the unemployment​ rate? A. Labor unions can significantly increase the unemployment rate when members go on strike. B. By increasing the wage above market​ equilibrium, labor unions considerably decrease the unemployment rate. C. By increasing the wage above market​ equilibrium, labor unions considerably increase the unemployment rate. D. Since few​ non-government workers are​ unionized, there is no significant effect on the unemployment rate.

D. Since few​ non-government workers are​ unionized, there is no significant effect on the unemployment rate. Labor unions are organizations of workers that bargain with employers for higher wages and better working conditions for their workers.​ Often, negotiated wages are higher than the market wage that would otherwise prevail. As a result of the​ above-market wage, employers in these industries tend to hire fewer workers. ​ However, so few workers are unionized that the overall effect on unemployment is negligible. Workers who cannot find work in unionized​ industries, because the wage is higher than market​ wage, can find work in​ non-unionized industries.

How do unemployment insurance payments in the United States and social insurance programs in other countries increase the unemployment​ rate? A. They are paid as long as the unemployed person remains unemployed. B. They increase the opportunity cost of job search. C. The payments are costly and firms are forced to lay off workers. D. They decrease the opportunity cost of job search.

D. They decrease the opportunity cost of job search. In the United States and most industrialized​ countries, unemployed workers are eligible for unemployment insurance programs from the government. As a​ result, the unemployed spend more time searching for a job and this additional time spent increases the unemployment rate. In the​ U.S., unemployment insurance payments are about half of the​ worker's previous salary and last six months. In Canada and Western​ Europe, however, these numbers are much higher and often pay 70 to 80 percent of the wage and last for a year or more. Without these​ payments, the opportunity cost of job search increases more quickly over time. Although there are many reasons unemployment rates differ across​ countries, most economists believe that since the opportunity cost of job search is lower in Western Europe and​ Canada, the unemployment rate tends to be higher than in the U.S.

The unemployment rate A. is the amount of people in the population that are not working. B. shows the percentage of the population that is considered unemployed. C. is the amount of the labor force that is not working. D. shows the percentage of the labor force that is considered unemployed. Suppose an economy is given by the​ following: Population​ = 252 million Labor force​ = 111 million The number of people employed​ = 104.9 million The number of people unemployed​ = 6.1 million Given the information​ above, the unemployment rate is ______​%. ​(Enter your response rounded to one decimal​ place.)

D. shows the percentage of the labor force that is considered unemployed. 5.5%

Why is the unemployment​ rate, as measured by the Bureau of Labor​ Statistics, an imperfect measure of the extent of joblessness in the​ economy? A. Discouraged workers are not considered unemployed. B. Underemployed people are considered employed. C. It fails to account for illegal activities. D. It does not account for inaccurate responses to the Current Population Survey. E. All of the above.

E. All of the above. Although the unemployment rate provides some useful information about the employment situation in the​ country, it is not a perfect measure of the state of joblessness in the economy. The measured rate of unemployment may understate the true extent of joblessness by not counting discouraged workers as unemployed. In​ addition, the Current Population Survey counts people as employed if they are working​ part-time jobs even if they prefer a​ full-time job. That​ is, the survey does not account for​ "underemployed" people. The measured unemployment rate can also overstate the true extent of joblessness because the Current Population Survey relies on​ self-reporting. A person might claim to have sought work​ (and therefore is counted as​ unemployed) even if they had not sought work so that they would remain eligible for unemployment benefits.

unemployment insurance payments

In the United​ States, unemployed workers are eligible for unemployment insurance payments that are equal to about half of their wage and last for six months. In other​ countries, social insurance programs pay up to 80 percent of the previous wage and last for a year or more.

labor unions

Organizations of workers that negotiate with employers for higher wages and better working conditions.

frictional unemployment

Short-term unemployment that arises from the process of matching workers with jobs.

natural rate of unemployment

The normal rate of​ unemployment, consisting of frictional unemployment plus structural unemployment.

unemployment rate

The percentage of the labor force that is unemployed calculated using the following​ formula: Number of unemployed/Number in labor force×100.

labor force

The sum of employed and unemployed workers in the economy.