ch 7 practice problems

If the steady-state rate of unemployment equals 0.125 and the fraction of unemployed workers who find jobs each month (the rate of job findings) is 0.56, then the fraction of employed workers who lose their jobs each month (the rate of job separations) must be:

0.08

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:

0.18

Economists who have studied minimum-wage laws in the United States find that a 10 percent increase in the minimum wage increases teenage unemployment by about:

1 to 3 percent.

If wage rigidity holds the real wage above the equilibrium level, an increase in the demand for labor will ______ the number unemployed.

decrease

The earned income tax credit:

does not raise labor costs

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

encouraging unsupervised workers to maintain a high level of productivity

Economist Robert Barro attributes the increase in the duration of unemployment to ______, while economist Paul Krugman attributes the increased duration to _____.

expanded unemployment-insurance coverage; insufficient consumer demand

Which of the following hypotheses is consistent with fewer hours worked per year in Europe than in the United States?

higher tax rates in Europe than in the United States

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

job losers, job leavers, marginally attached

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

job training programs; 100 percent experience rated unemployment insurance

Assume that a country experiences a reduction in productivity that lowers the marginal product of labor for any given level of labor. In this case, the:

labor demand curve shifts downward and to the left.

Compared with an employed white teenage male, an employed middle-aged white male is ______ likely to become unemployed and, once unemployed, is ______ likely to find a job.

less; just as

Earlier retirement in Europe than in the United States contributes to:

lower employment-to-population ratios in Europe than in the United States.

Government policies directed at reducing frictional unemployment include:

making unemployment insurance 100 percent experience rated.

Data on unemployment in the United States show that:

most weeks of unemployment are attributable to the long-term unemployed.

If s is the rate of job separation, f is the rate of job finding, and both rates are constant, then the unemployment rate is approximately:

s/(s + f)

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

sectoral shifts.

The natural rate of unemployment is:

the average rate of unemployment around which the economy fluctuates.

Which of the following statements correctly describes European labor markets?

In recent years, the average unemployment rate in Europe has been higher than the unemployment rate in the United States.

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

will decrease

Which of the following statements most closely describes the variation in unemployment rates across countries in Europe?

Countries with higher rates of unionization tend to have higher unemployment rates, but this is partially mitigated if wage negotiations are coordinated among employers.

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 lower real wage and no change in unemployment.

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

black males.

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

no change in the real wage and a rise in unemployment.

Paying efficiency wages helps firms reduce the problem of adverse selection by:

providing an incentive for the best-qualified workers to remain with the firm.