Macroeconomics Chapter 7

Suppose that over the course of a year 100 people are unemployed for 4 weeks each (the short-term unemployed), while 10 people are unemployed for 52 weeks each (the long-term unemployed). Approximately what percentage of the total spells of unemployment were attributable to the long-term unemployed?

*a. 9 percent.* b. 10 percent. c. 43.5 percent. d. 56.5 percent.

Unions contribute to structural unemployment when collective bargaining results in wages:

*a. above the equilibrium level.* b. below the minimum wage. c. below the equilibrium level. d. above the level of unemployment compensation.

As the relative demand for unskilled workers falls, wages for unskilled workers and unemployment compensation becomes a attractive option.

*a. fall; more* b. fall; less c. rise; more d. rise; less

Unemployment caused by the time it takes workers to search for a job is called unemployment.

*a. frictional* b. structural c. efficiency d. insider

One reason for unemployment is that:

*a. it takes time to match workers and jobs.* b. all jobs are identical. c. the labor market is always in equilibrium. d. a laid-off worker can immediately find a new job at the market wage.

When the real wage is above the level that equilibrates supply and demand:

*a. the quantity of labor supplied exceeds the quantity demanded.* b. the quantity of labor demanded exceeds the quantity supplied. c. there is no unemployment. d. the labor market clears.

Paying efficiency wages helps firms reduce the problem of moral hazard by:

a. generating additional profits that can be used to improve working conditions. b. matching the wages each worker is paid to the number of units of output each worker produces. *c. encouraging unsupervised workers to maintain a high level of productivity.* d. providing an incentive for the best-qualified workers to remain with the firm.

Much of the difference in unemployment rates across Europe is attributable to differences in:

a. short-term unemployment. *b. long-term unemployment.* c. frictional unemployment. d. the natural rate of unemployment.

Short-term unemployment is most likely to be ________ unemployment, while long-term unemployment is mostly likely to be _________ unemployment.

a. structural; frictional b. structural; the natural rate of c. the natural rate of} frictional *d. frictional; structural*

A policy that decreases the job separation rate ________the natural rate of unemployment.

a. will increase *b. will decrease* c. will not change d. could either increase or decrease

If the steady-state rate of unemployment equals 0.10 and the fraction of employed workers who lose their jobs each month (the rate of job separations) is 0.02, then the fraction of unemployed workers who find jobs each month (the rate of job findings) must be:

a. 0.02. b. 0.08. c. 0.10, *d. 0.18.*

The natural rate of unemployment in the United States since 1950 has averaged between and percent.

a. 0;1 b. 1;3 *c. 5;6* d. 10; 5

Assume that a country experiences a reduction in productivity that shifts the labor demand curve downward and to the left. If the labor market were always in equilibrium, this would lead to:

a. a lower real wage and a rise in unemployment. *b. a lower real wage and no change in unemployment.* c. a lower real wage and less unemployment. d. no change in real wage or in unemployment.

Firms currently have incentives to temporarily lay off workers because firms typically are charged for of workers' unemployment benefits.

a. all *b. only a part* c. none d. twice the cost

In 2007 in the United States among labor-force members ages 16 to 19, the highest unemployment rate was for:

a. black females. *b. black males.* c. White females. d. white males.

Which of the following rankings (from most severe to least severe) best captures the degree of hardship associated with various types of unemployment?

a. discouraged worker, short term, long term b. involuntarily part time, job leavers, job losers, *c. job losers, job leavers, marginally attached* d. job leavers, involuntary part time, discouraged workers

Public policy to increase the job finding rate include ______ and public policy to decrease the job separation rate include _______.

a. government employment agencies; higher unemployment insurance benefits *b. job training programs; 100 percent experience rated unemployment insurance* c. higher minimum wage laws; payment of unemployment benefits for longer periods d. higher efficiency wages; partially experience rated unemployment insurance

More frequent holidays for workers in Europe than in the United States contribute to:

a. higher employment-to-population ratios in Europe than in the United States. b. lower employment-to-population ratios in Europe than in the United States. c. more hours worked per year by the average employed person in Europe than the average employed person in the United States. *d. fewer hours worked per year by the average employed person in Europe than the average employed person in the United States.*

According to Blanchard, Europeans are more likely to use increases in real wages resulting from technological progress to increase ___________, and Americans are more likely to use these increases in real wages to increase___________.

a. hours of work; hours of leisure b. consumption of goods and services; hours of leisure *c. hours of leisure; consumption of goods and services* d. unemployment insurance benefits; efficiency wages

The earned income tax credit:

a. increases the government's tax revenue. b. reduces the incomes of poor working families. *c. does not raise labor costs.* d. is not an alternative to raising the minimum wage.

Economists call the changes in the composition of demand among industries and regions:

a. insider-outsider conflicts *b. sectoral shifts.* c. moral hazard. d. adverse selection.

The minimum wage:

a. is usually about 75 percent of the average wage earned in manufacturing. b. raises the wages of highly skilled workers. c. encourages master workers to take on apprentices. *d. has its greatest impact on teenage unemployment.*

Examples of "active" labor-market policies include all of the following except:

a. job-search assistance b. subsidized employment *c. unemployment insurance* d. job-training programs

Unemployment insurance increases the amount of frictional unemployment by:

a. making workers more frantic in their search for new jobs b. inducing workers to accept the first job offer that they receive c. making employers more reluctant to lay off workers *d. softening the economic hardship of unemployment.*

All of the following are causes of structural unemployment except:

a. minimum-wage laws. b. the monopoly power of unions. *c. unemployment insurance.* d. efficiency wages.

Entry into and exit from the labor force are important to the determination of the unemployment rate because:

a. more than one-half of the unemployed have only recently entered the labor force. b. most of the unemployed are young workers still looking for their first job. c. discouraged workers are counted as part of the labor force. *d. almost one-half of all spells of unemployment end in the unemployed person's withdrawal from the labor market.*

In recent years, Europe has experienced _________ unemployment than the United States, and employed Europeans work __________ hours than employed Americans.

a. more; more *b. more; fewer* c. less; fewer d. less; more

Data on unemployment in the United States show that:

a. most spells of unemployment are long. *b. most weeks of unemployment are attributable to the long-term unemployed.* c. members of the labor force over age 55 have the highest unemployment rates. d. the duration of unemployment falls during recessions.

When outsiders have a greater role than do insiders in the wage-bargaining process, the negotiated wage is likely to be ______ the equilibrium wage.

a. much greater than b. much less than *c. much closer to* d. about twice

In a steady state:

a. no hiring or firings are occurring. *b. the number of people finding jobs equals the number of people losing jobs.* c. the number of people finding jobs exceeds the number of people losing jobs. d. the number of people losing jobs exceeds the number of people finding jobs.

Transitions into and out of the labor force:

a. rarely occur, b. do not affect unemployment statistics. *c. make unemployment statistics difficult to interpret.* d. reduce the amount of frictional unemployment.

Efficiency-wage theories suggest that a firm may pay workers more than the market-clearing wage for all of the following reasons except to:

a. reduce labor turnover. b. improve the quality of the firm's labor force. c. increase worker effort. *d. reduce the firm's wage bill.*

When there is structural unemployment, the real wage is:

a. rigid at a level below the market-clearing level. b. rigid at the market-clearing level. *c. rigid at a level above the market-clearing level.* d. flexible.