Money and Banking Chapter 7 Homework

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 weeks of unemployment were attributable to the long-term unemployed?

56.5 percent.

If the number of employed workers equals 200 million and the number of unemployed workers equals 20 million, the unemployment rate equals ______ percent (rounded to the nearest percent).

9

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?

9 percent.

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 the fraction of employed workers who lose their jobs each month (the rate of job separations) is 0.01 and the fraction of the unemployed who find a job each month is 0.09 (the rate of job findings), then the natural rate of unemployment is:

10 percent.

In past nonrecessionary periods, a typical worker in the United States who is covered by unemployment insurance receives ______ percent of his or her former wages for ______ weeks.

50; 26

Which of the following is an example of frictional unemployment?

Dave searches for a new job after voluntarily moving to San Diego.

Which of the following is the best example of structural unemployment?

Kirby is seeking a job as an airline pilot, but the high union wages in the industry have limited the number of jobs available

Unions contribute to structural unemployment when collective bargaining results in wages

above the equilibrium level

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.

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:

a lower real wage and no change in unemployment.

The earned income tax credit:

does not raise labor costs.

Short-term unemployment is most likely to be ______ unemployment, while long-term unemployment is mostly likely to be _____ unemployment

frictional; structural

The minimum wage:

has its greatest impact on teenage unemployment

If wage rigidity holds the real wage above the equilibrium level, an increase in the supply of labor will ______ the number unemployed

increase

When Henry Ford paid his workers $5 per day when the prevailing wage was between $2 and $3 a day:

it raised the efficiency of his workers

One reason for unemployment is that:

it takes time to match workers and jobs

By paying efficiency wages, firms contribute to higher unemployment because they

keep the wage above the equilibrium level.

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

much greater than

Discouraged workers are counted as:

out of the labor force.

Wage rigidity

prevents labor demand and labor supply from reaching the equilibrium level

According to efficiency-wage theories, firms benefit by paying higher-than-equilibrium wages because worker _____ increases.

productivity

Permitting a lower minimum wage for teenagers would likely:

raise unemployment among unskilled adults.

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

reduce the firm's wage bill.

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

sectorial shifts.

Most spells of unemployment are ______ term, and most weeks of unemployment are attributable to ______-term unemployment.

short; long

Unemployment insurance increases the amount of frictional unemployment by:

softening the economic hardship of unemployment

The unemployment resulting from wage rigidity and job rationing is called ______ unemployment.

structural

The unemployment resulting when real wages are held above equilibrium is called ______ unemployment, while the unemployment that occurs as workers search for a job that best suits their skills is called ______ unemployment.

structural; frictional

The natural rate of unemployment is

the average rate of unemployment around which the economy fluctuates.

One efficiency-wage theory implies that firms pay high wages because:

the more a firm pays its workers, the greater their incentive to stay with the firm

Frictional unemployment is unemployment caused by:

the time it takes workers to search for a job.

In the model of the steady-state unemployment rate with a fixed labor force, the rate of job finding equals the percentage of the ______ who find a job each month, while the rate of job separation equals the percentage of the ______ who lose their job each month.

unemployed; employed

According to efficiency-wage theories, firms benefit by paying higher-than-equilibrium wages because worker _____ increases

unemployment insurance.

All of the following are causes of structural unemployment except:

unemployment insurance.

Workers unemployed as a result of wage rigidity are:

waiting for a job to become available.

Discouraged workers are individuals who:

want a job but have given up looking for one.

A policy that increases the job-finding rate _____ the natural rate of unemployment

will decrease

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

decrease