Unemployment: Economics Chapter 15

Karena was laid off, but she is expecting to be recalled. She has not looked for work since being laid off. Nathan is not employed, nor was he laid off. Who is counted as "unemployed" in the U.S. labor force statistics? a. 1) Karena and 2) Nathan, even if Nathan has not looked for work during the previous four weeks b. 1) Karena and 2) Nathan, if Nathan has looked for work during the previous four weeks c. 1) not Karena but 2) Nathan, even if Nathan has not looked for work during the previous four weeks d. 1) not Karena but 2) Nathan, if Nathan has looked for work during the previous four weeks

1) Karena and 2) Nathan, if Nathan has looked for work during the previous four weeks

The Bureau of Labor Statistics counts a member of a surveyed household as an adult if that person is at least a. 14 years old. b. 16 years old. c. 18 years old. d. 21 years old.

16 years old

Refer to Figure 28-3. If the government imposes a minimum wage of $8, then how many workers will be employed? a. 3,000 b. 4,000 c. 5,000 d. 7,000

3,000

Suppose that some country had an adult population of about 46 million, a labor-force participation rate of 75 percent, and an unemployment rate of 8 percent. How many people were employed? a. 2.76 million b. 31.74 million c. 34.5 million d. 42.32 million

31.74 Million

Minimum-wage laws can keep wages a. above equilibrium and cause a surplus of labor. b. above equilibrium and cause a shortage of labor. c. below equilibrium and cause a surplus of labor. d. below equilibrium and cause a shortage of labor.

Above equilibrium and cause a surplus od labor

What is the theory of efficiency wages? Provide four reasons that employers might pay efficiency wages.

According to the theory of efficiency wages, firms operate more efficiently if wages are above the equilibrium level. Therefore, it may be profitable for firms to keep wages high even in the presence of an excess supply of labor. If so, firms will keep wages above the equilibrium level, creating unemployment. (1) Worker Health: Better-paid workers eat a more nutritious diet, and workers who eat a better diet are healthier and more productive. A firm may find it profitable to pay higher wages in order to have healthier, more productive workers. (2) Worker Turnover: The more a firm pays its workers, the less often its workers choose to leave the firm. Since it is costly to hire and train new workers, it may be profitable for an employer to pay higher than equilibrium wages in order to reduce worker turnover rates. (3) Worker Effort: In jobs where workers have some discretion over how hard they work, workers may shirk. As a result, firms monitor the effort of their workers, and those caught shirking are fired. However, it is costly to monitor workers, and monitoring is often imperfect. By paying higher wages, firms make it more expensive for workers to shirk, since if they are caught they will not readily find other employment at their current wage. It may be profitable for a firm to pay higher than market wages in order to reduce shirking. (4) Worker Quality: When a firm hires new workers, it cannot perfectly gauge the quality of the applicants. By paying a higher wage, the firm attracts a better pool of workers to apply for its jobs. It may be profitable for a firm to pay higher than market wages in order to increase the probability that it will hire good-quality workers.

A person who is counted as "unemployed" by the Bureau of Labor Statistics a. is also in the labor force. b. must have recently looked for work or be on temporary layoff. c. must be at least 16 years old. d. All of the above are correct.

All of the above are correct

The Bureau of Labor Statistics places people in the "employed" category if they a. are temporarily absent from their jobs. b. are self-employed. c. work without pay in a family member's business. d. All of the above are correct.

All of the above are correct

. Olga owns her own business. Sven is an unpaid worker in his family's business. Who is included in the Bureau of Labor Statistics' "employed" category? a. only Olga b. only Sven c. both Olga and Sven d. neither Olga nor Sven

Both olga and sven

Do economists believe that labor unions are good or bad for the U.S. economy?

Economists disagree. Critics argue that by functioning as a cartel, unions raise the wages of union jobs above the equilibrium, which increases unemployment in union jobs and lowers wages in nonunion jobs. Advocates argue that unions give workers some power to negotiate with firms.

Frictional unemployment is often thought to explain relatively long spells of unemployment. a. True b. False

False

Refer to Table 28-11. The unemployment rate of Tajnia in 2010 is about 7.5 percent. a. True b. False

False

If unions were formed in more industries, the supply of labor in other industries would a. increase, causing employment in other industries to rise. b. increase, causing employment in other industries to fall. c. decrease, causing employment in other industries to rise. d. decrease, causing employment in other industries to fall.

Increase causing employment in other industries to rise

Who would be included in the labor force? a. Maggie, who plans to work at the newspaper next year when she turns 16 years old. b. Lisa, who is unhappy with her current job. c. Bart, who is a full-time student and uninterested in finding employment. d. None of the above is correct.

Lisa who is unhappy with her current job

Provide a definition of the natural rate of unemployment.

The amount of unemployment that the economy normally experiences (about 5%).

Discuss the labor-force participation trends for men and women since 1950.

The labor-force participation rates for men have declined somewhat from about 90 to 70 percent, whereas the labor-force participation rates for women have increased dramatically from about 33 to almost 60 percent.

A minimum wage that is below the equilibrium wage rate does not raise unemployment. a. True b. False

True

Because people move into and out of the labor force so often, statistics on unemployment are difficult to interpret. a. True b. False

True

If all workers and all jobs were the same such that all workers were equally well suited for all jobs, then there would be no frictional unemployment. a. True b. False

True

If the wage is kept above the equilibrium wage for any reason, the result is structural unemployment. a. True b. False

True

People who report being not in the labor force but who, in fact, want to work but have given up trying to find a job after an unsuccessful search cause the reported unemployment rate to be lower than it would otherwise be. a. True b. False

True

The Bureau of Labor Statistics' U-1 measure of joblessness includes only very long-term unemployed. a. True b. False

True

Unemployment insurance increases frictional unemployment. a. True b. False

True

Almost nine-tenths of all spells of unemployment end when the unemployed person finds a job. a. True b. False

alse

President Bigego is running for re-election against Senator Pander. Bigego proclaims that more people are working now than when he took office. Pander says that the unemployment rate is higher now than when Bigego took office. You conclude that a. one of them must be lying. b. both of them could be telling the truth if the labor force, and employment grew at the exact same rate. c. both of them could be telling the truth if the labor force grew slower than employment. d. both of them could be telling the truth if the labor force grew faster than employment.

both of them could be telling the truth if the labor force grew faster than employment.

Which of the following is a source of frictional unemployment? a. changes in the composition of demand among industries or regions b. minimum wages c. labor unions d. None of the above is correct.

changes in composition of demand among industries or regions

A person who is not employed and claims to be trying hard to find a job but really is not trying hard to find a job is a. counted as out of the labor force but should be counted as unemployed. b. counted as unemployed but should be counted as out of the labor force. c. correctly counted as out of the labor force. d. correctly counted as unemployed.

counted as unemployed but should be counted as out of the labor force

The unemployment rate is computed as the number of unemployed a. divided by the labor force, all times 100. b. divided by the number of employed, all times 100. c. divided by the adult population, all times 100. d. times the labor-force participation rate, all times 100.

divided by the labor force all times 100

A firm may pay efficiency wages in an attempt to a. entice workers to work the night shift rather than the day shift. b. improve productivity by reducing turnover. c. reduce costs by attracting the least-skilled workers to apply for job vacancies. d. All of the above are correct.

improve productivity by reducing turnover

Unemployment insurance __________ the amount of unemployment.

increases

Which of the following is not a cause of frictional unemployment? a. the destruction of manufacturing jobs b. a worker leaving a job to find one with better benefits c. minimum-wage laws d. unemployment insurance

minimum wage laws

Cyclical unemployment refers to a. the portion of unemployment created by job search. b. short-run fluctuations around the natural rate of unemployment. c. changes in unemployment due to changes in the natural rate of unemployment. d. the portion of unemployment created by wages set above the equilibrium level.

short run fluctuations around the natural rate of unemployment

Evidence indicates that the typical person who becomes unemployed will a. soon find a job. b. find a job but not before a year or more has gone by. c. leave the labor force and never return. d. retire soon after

soon find a job

Which of the following is correct? a. In the U.S. the natural rate of unemployment is frequently near 2%. b. The natural rate of unemployment fluctuates more than the cyclical rate of unemployment. c. The cyclical rate of unemployment is sometimes below the natural rate of unemployment. d. None of the above is correct.

the cyclical rate of unemployment is sometimes blow the natural rate of unemployment