ECON 1115 Chapter 7

Frictional Unemployment

A new college graduate actively seeking a job

Structural Unemployment

A skilled airline pilot looking for work after being laid off as a result of fewer airplanes being purchased

Cyclical Unemployment

A worker laid off following a decline i GDP

Which of the following is the correct way to calculate the unemployment rate? A) [(unemployed)/(population)] X 100 B) [(unemployed)/(labor force)] X 100 C) [(labor force)/(population)] X 100 D) [(labor force)/(unemployed)] X 100

B) [(unemployed)/(labor force)] X 100

The presence of discouraged workers A) increases the size of the labor force but does not affect the unemployment rate. B) may cause the official unemployment rate to understate the true amount of unemployment. C) may cause the official unemployment rate to overstate the true amount of unemployment. D) reduces the size of the labor force but does not affect the unemployment rate.

B) may cause the official unemployment rate to understate the true amount of unemployment.

If the unemployment rate increases A) fewer people are working. B) the labor force may have increased. C) the economy is worse off. D) the labor force decreased.

B) the labor force may have increased.

If more people just start looking for work A) the unemployment rate will rise and the economy will be worse off. B) the unemployment rate will rise but the economy will be better off. C) the unemployment rate will fall and the economy will be worse off. D) the unemployment rate will fall and the economy will be better off.

B) the unemployment rate will rise but the economy will be better off.

In 2009, the worst year of the Great Recession in the U.S., the unemployment rate was about A) 25% B) 15% C) 10% D) 5%

C) 10%

The full-employment unemployment rate for the United States economy is now generally considered to be A) 2 percent of the labor force B) 3 percent of the labor force C) 4.5 to 5 percent of the labor force D) 8.5 to 9 percent of the labor force

C) 4.5 to 5 percent of the labor force

Full-time homemakers and retirees are classified in the BLS data as: A) Employed. B) Unemployed. C) Not in the labor force D) Members of the labor force, but not working.

C) Not in the labor force

The aggregate cost of unemployment can be measured by the: A) excess of nominal GDP over real GDP. B) amount by which actual GDP exceeds potential GDP. C) amount by which potential GDP exceeds actual GDP. D) excess of real GDP over nominal GDP.

C) amount by which potential GDP exceeds actual GDP.

Full-employment output could also be called: A) zero-unemployment output. B) equilibrium output. C) potential output. D) none of the above

C) potential output.

The government agency responsible for collecting and reporting unemployment data is A) the Bureau of Economic Research. B) the Bureau of Unemployment and Statistics. C) the Bureau of Labor Statistics. D) the Bureau of Economic Analysis.

C) the Bureau of Labor Statistics.

If the labor force increases and the number of employed workers stays the same A) the unemployment rate will not change. B) the unemployment rate will fall. C) the unemployment rate will rise D) it's not possible to determine.

C) the unemployment rate will rise

In 1933, the worst year of the Great Depression, the unemployment rate in the United States was about A) 40% B) 33% C) 15% D) 25%

D) 25%

Which of the following would be counted as unemployed? A) A college student who is not working during the school year B) A retired college professor C) A teenager who is not working this summer D) A lawyer who just resigned from her firm, and is looking for a new position

D) A lawyer who just resigned from her firm, and is looking for a new position

"Full employment" refers to the situation when there is: A) 100% employment of the labor force B) 0% unemployment rate C) No frictional or structural unemployment D) No cyclical unemployment

D) No cyclical unemployment

Given an announcement of increased numbers of unemployed individuals, what must be happening to the unemployment rate? The unemployment rate: A) Must be increasing because total unemployment is increasing B) May not change due to weaknesses in our unemployment measures C) Will decrease if employment does not increase D) Will decrease if employment rises more rapidly than unemployment

D) Will decrease if employment rises more rapidly than unemployment

"Full employment" refers to the situation when there is A) 100% employment of the labor force. B) 0% unemployment rate C) no frictional or structural unemployment D) no cyclical unemployment

D) no cyclical unemployment

For every 1 percentage point that the actual unemployment rate exceeds the natural rate, a 2 percentage point negative GDP gap occurs. This is a statement of

Okun's Law

Kevin has lost his job in an automobile plant because the company switched to robots for its welding step in the assembly line. Kevin plans to go to technical school to learn how to repair microcomputers. The type of unemployment Kevin is faced with is:

Structural Unemployment

To be counted as unemployed, you must be older than 15, non-institutionalized, and

looking for work in the last 4 weeks.

We have reached full employment when which of the following is true? A) Cyclical unemployment is zero, but frictional and structural unemployment are positive. B) Frictional unemployment is zero, but cyclical and structural unemployment are positive. C) Structural unemployment is zero, but frictional and cyclical unemployment are positive. D) Cyclical, frictional, and structural unemployment are all zero.

A) Cyclical unemployment is zero, but frictional and structural unemployment are positive.

In calculating the unemployment rate, "discouraged" workers who are not actively seeking employment are A) excluded from the labor force B) used to determine the size of the labor force C) treated the same as part-time workers D) included as part of the unemployed

A) excluded from the labor force

If the actual rate of unemployment is above the natural rate of unemployment, then potential GDP is A) greater than actual GDP B) equal to actual GDP C) equal to the GDP gap D) less than actual GDP

A) greater than actual GDP

If the labor force and the unemployed go up by the same amount A) the unemployment rate would rise. B) the unemployment rate would fall. C) the unemployment rate would stay the same. D) there is not enough information to know for sure.

A) the unemployment rate would rise.

Okun's law A) measures the trade-off between the rate of inflation and the rate of unemployment. B) indicates the number of years it will take for a constant rate of inflation to double the price level. C) quantifies the relationship between nominal and real incomes. D) shows the relationship between the unemployment rate and the size of the negative GDP gap.

D) shows the relationship between the unemployment rate and the size of the negative GDP gap.