MACROECON chapter 15

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If an unemployed person quits looking for work, then, eventually the unemployment rate

and the labor-force participation rate both decrease

Are people more or less affected by minimum wage?

fewer people are affected by minimum wage (downward slope)

theory of efficiency wages

firms voluntarily pay above-equilibrium wages to boost worker productivity

natural unemployment -<

frictional and structural

Providing training for unemployed individuals is primarily intended to reduce

frictional unemployment

most recent high unemployment rate

was 10% in 2010

reasons why firms may pay high wages

worker turnover, worker quality, worker effort

insiders

workers still employed are better off

outsiders

workers who lose their jobs are worse off

Cyclical unemployment refers to

year-to-year fluctuations of unemployment around its natural rate

Refer to Figure 28-3. If the government imposes a minimum wage of $4 (price floor), how many workers will be unemployed?

zero

The Bureau of Labor Statistics reported in 2005 that there were 28.19 million people over age 25 who had no high school degree or its equivalent, 11.73 million of whom were employed and 1.04 million of whom were unemployed. What were the labor-force participation rate and the unemployment rate for this group?

45.3% and 8.1%

the highest minimum wage in nominal terms was

9% in the late 60s

Suppose that the adult population is 6 million, the number of employed is 3.8 million, and the labor-force participation rate is 70%. What is the unemployment rate?

9.5%

John is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. Curtis has looked for work as an accountant for some time. While the demand for accountants does not appear to be falling, there seems to be more people applying than jobs available

John is frictionally unemployed, and Curtis is structurally unemployed

unemployment insurance

a government program that partially protects workers' incomes when they become unemployed

union

a worker association that bargains with employers over wages, benefits, and working conditions

Wages in excess of their equilibrium level help explain

both structural unemployment and the natural rate of unemployment

sectoral shifts

changes in the composition of demand across industries or regions of the country

unemployment -<

cyclical and natural

unemployment rate excludes

discouraged workers (also doesn't distinguish b/w full and part-time work)

The designation "natural" implies that the natural rate of unemployment

does not go away on its own even in the long run

the decade of the 90's

had a high participation rate and has since decreased

Satchel loses his job and immediately begins looking for another. Other things the same, the unemployment rate

increases, and the labor-force participation rate is unaffected

labor force participation rate for men

is downward sloping

frictional unemployment longevity

is short term

labor force participation rate for women

is upward sloping

structural unemployment longevity

is usually longer term

Which of the following is not an explanation for the existence of structural unemployment?

job search

unemployment is when

labor supply > labor demand

higher education level

means less unemplyment

what are causes of structural unemployment?

minimum wage law, unions, efficiency wage

there has been a natural decline in

natural unemployment rate (recently)

An economist claims that changes in information technology and unemployment insurance have reduced unemployment. Which of these changes affect frictional unemployment?

neither the changes in information technology nor the changes in unemployment insurance

not in the labor force

not employed and are not unemployed (not looking for a job)

unemployment rate =

number of unemployed/labor force x 100

structural unemployment

occurs when there are fewer jobs than workers

frictional unemployment

occurs when workers spend time searching for the jobs that best suit their skills and tastes

unemployed

people who are not employed but want to work and are looking for a job

employed

people who work

what can unemployment insurance do?

reduce uncertainty over incomes, give unemployed more time to search, increase frictional unemployment (making workers less willing to accept jobs)

Since the 1940's U.S. union membership has

risen, this increase should have raised structural unemployment

People who are unemployed because wages are, for some reason, set above the level that brings labor supply and demand into equilibrium are best classified as

structurally unemployed

cyclical unemployment

the deviation of unemployment from its natural rate and is associated with business cycles

natural rate of unemployment

the normal rate of unemployment around which the actual unemployment rate fluctuates

labor force

the number of employed plus the number of unemployed

unemployment rate

the percentage of labor force that is unemployed

labor-force participation rate

the percentage of the total adult population that is in the labor force (the fraction of the population that has chosen to participate in the labor market)


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