Chapter 7 review

14. (Q014) In what year did the labor force participation rate of black women become greater than 60%? A. 1996 B. 1997 C. 2000 D. 2010

A. 1996 FEEDBACK: Looking at the labor force participation rate trend line for black women, we see that it exceeded 60% in 1996.

15. (Q015) By approximately how much more did the unemployment rate increase for black men than for white men during the 2007-2009 recession? A. 2 to 3 percentage points B. 5 to 6 percentage points C. 7 to 8 percentage points D. 9 to 10 percentage points

A. 2 to 3 percentage points FEEDBACK: During the 2007-2009 recession, the unemployment rate increased for both groups. At the beginning of the recession, black men had an unemployment rate of 10%, and by the conclusion of the recession, their unemployment rate was 17.5%. This is an increase of 7.5 percentage points. At the beginning of the recession, white men had an unemployment rate of 4.5%, and by the conclusion of the recession their unemployment rate was 9%. This is an increase of 4.5 percentage points. If we subtract the change in the unemployment rates of the two groups, we get: 7.5% (black men) - 4.5% (white men) = 3%. So the difference in unemployment rates between black men and white men is in the range of 2 to 3 percentage points.

(Q013) What was the cyclical unemployment rate for white men in 2013? A. 2% B. 7% C. 9%

A. 2% FEEDBACK: In 2013, the unemployment rate for white men averaged just under 7%. The natural rate of unemployment is 4-5%. We define cyclical unemployment as unemployment above the natural rate. When you subtract the natural rate of unemployment (somewhere between 4-5%) from the prevailing unemployment rate (somewhat under 7%) you have a cyclical unemployment rate of roughly 2%.

5. (Q005) Which of the following can lower the level of frictional unemployment over time? A. an increase in the number of online job search engines B. stringent government labor market regulations C. an increase in the level of unemployment benefits

A. an increase in the number of online job search engines FEEDBACK: Frictional unemployment occurs because of delays in matching workers to jobs. With more online job search engines, workers and employers will find each other more quickly. This will lower the level of frictional unemployment.

6. (Q006) A person is unemployed if he A. is a member of the civilian labor force, out of work, and actively seeking work. B. is 15 years old and seeking his first job. C. is out of work, available for work, but not actively seeking work.

A. is a member of the civilian labor force, out of work, and actively seeking work. FEEDBACK: The government counts somebody in the official statistics as unemployed if they are work eligible and not working but actively seeking work. Children under the age of 16 would not be counted as unemployed, because they are not work eligible.

2. (Q002) Technological advancements in online banking have led to its widespread use. As a result, many bank tellers have become unemployed. This is an example of ________ unemployment. A. structural B. frictional C. cyclical D. normal

A. structural FEEDBACK: Structural unemployment is caused by changes in the industrial make-up or structure of the economy. Technological advancements in online banking have made the jobs of many bank tellers obsolete.

3. (Q003) Which of the following is true when the economy is at full employment? A. The unemployment rate is equal to 0%. B. The unemployment rate is equal to the natural rate of unemployment. C. The unemployment rate is equal to the cyclical rate of unemployment. D. The natural unemployment rate is equal to 0%. E. The employment rate is equal to 100%.

B. The unemployment rate is equal to the natural rate of unemployment. FEEDBACK: At any given time, the unemployment rate is equal to the natural rate plus the cyclical rate. Since a healthy economy will always have natural unemployment (part frictional, part structural), the unemployment rate will never equal 0%. When the macroeconomic conditions are healthy--when gross domestic product (GDP) is growing normally--cyclical unemployment will be zero. During those times, the economy will produce its full employment output and all unemployment will be natural unemployment.

4. (Q004) If the real GDP in a country is at a higher output level than full-employment output, which of the following is true? A. The unemployment rate is greater than the natural rate. B. The unemployment rate is lower than the natural rate. C. The cyclical unemployment rate is positive.

B. The unemployment rate is lower than the natural rate. FEEDBACK: The unemployment rate equals the natural rate plus the cyclical rate. An economy can produce more than its full-employment output only when resources, especially labor, are overemployed. Then the unemployment rate must be lower than the natural rate of unemployment, and so cyclical unemployment will be negative, not positive.

12. Q012) The labor force participation rate for white men has ________ since 1972. A. increased B. decreased C. remained the same

B. decreased FEEDBACK: As more baby boomers are retiring, and more men are going back to school, the labor force participation rate for men has decreased.

16. (Q016) Since 1972, labor force participation among women has generally ________, while labor force participation among men has generally ________. A.decreased/increased B. increased/decreased C. decreased/decreased D. increased/increased

B. increased/decreased FEEDBACK: Notice the trend lines for black women and white women both start below 50% in 1972. By 2000, the labor force participation rate among women is near 60%. Even after declines since then, it remains above 55%. Men have experienced the opposite, with a decline of about 10 percentage points since 1972 for both white and black men.

7. (Q007) Refer to the following table. Calculate the unemployment rate for this economy based on the data provided. Institutionalized 14 Full-time workers 113 Less than 16 years of age 40 Armed forces (noncivilian) 20 Part-time workers 27 Population 314 Looking for work 14 A. 11% B. 4.5% C. 9.1% D. 8.8%

C. 9.1% FEEDBACK: The formula for the unemployment rate: u=number employed/labor force X 100 To solve this problem, you need to know the number of people employed and the number of people unemployed. The table provides the number of part-time and full-time workers. The number employed is equal to part-time workers plus full-time workers, or (in millions) 27 + 113 = 140. The table also tells us that 14 million people are looking for work; this group should be counted as unemployed. The total labor force equals employed + unemployed, or (in millions) 140 + 14 = 154. Based on the equation for the unemployment rate we see that unemployment rate = (14 ÷ 154) × 100 = 9.1%.

9. (Q009) Jenny works as a nanny. She gets paid once a month by the family she works for. Since she finds caring for children exhausting, she's looking for another job. Given what we know, we can say that A. Jenny is not work eligible and so is not counted as part of the labor force. B. Jenny counts as unemployed because she is looking for another job. C. Jenny counts as employed because she is still working as a nanny. D. Jenny is not counted as part of the labor force because she is a member of the family.

C. Jenny counts as employed because she is still working as a nanny. FEEDBACK: Jenny is employed because she is working and getting paid. If she weren't getting paid to do the same work (for example, if she were a family member doing all of the same work for free while looking for her first job), she would be counted as unemployed.

11. (Q011) Which of the following would not be responsible for a drop in the unemployment rate? A. There is an increase in the number of marginally attached workers. B. People with full-time jobs take early retirement. C. More and more stay-at-home moms rejoin the labor force in search of jobs.

C. More and more stay-at-home moms rejoin the labor force in search of jobs. FEEDBACK: To count as unemployed, a person must be actively looking for work. The unemployment rate can fall if some people who were job-hunting become discouraged and give up looking for jobs. When workers become discouraged, they drop out of the pool of unemployed workers and, by definition, they are no longer counted as members of the labor force. People retiring would also lower the unemployment rate, again by shrinking the labor force.

8. (Q008) The cyclical unemployment rate is defined as the ________ unemployment rates. A. sum of the structural and frictional B. difference between the structural and frictional C. difference between the existing (actual) and natural D. sum of the natural and frictional

C. difference between the existing (actual) and natural FEEDBACK: Both structural and frictional unemployment are consistent with a growing, evolving economy. The root cause of cyclical unemployment is an unhealthy economy. Unlike structural unemployment and frictional unemployment, cyclical unemployment is not considered a natural type of unemployment. It is the difference between the existing unemployment rate and the natural rate.

10. (Q010) Bonnie Austin, age 30, used to work part-time in a local restaurant. This year she quit her job to take care of her five-month-old daughter. She is currently not looking for a job. The survey conducted by the Bureau of Labor Statistics today will count Bonnie as A. unemployed. B. employed. C. not in the labor force. D. not in the working-age population.

C. not in the labor force. FEEDBACK: A person will be counted as unemployed only if he or she is part of the labor force, which requires actively seeking work. Stay-at-home parents are not counted as unemployed, because they are not looking for work. Bonnie will not be counted a part of the official labor force until she decides to go back to work.

17. (Q017) Which of the following recessions saw the highest unemployment rate changes among men? A. 1974-75 B. 1990-91 C. 2001-02 D. 2007-09

D. 2007-09 FEEDBACK: By examining the graph, we can see that the largest increase in unemployment rates among black and white men occurred from 2007 to 2009. The unemployment rate among black men increased from 10.0% in December 2007 to 17.5% in June 2009, for an increase of 7.5 percentage points. Over the same period, the unemployment rate for white men went from 4.5% to 9%, for an increase of 4.5 percentage points. This is one of the largest increases in unemployment rates among men in U.S. history.

1. (Q001) Which of the following represents frictional unemployment?• The demand for refrigerators falls when the economy enters a recession, and refrigerator manufacturers lay off some of their workers, one of which is Anton. • John is working for General Motors (GM) when GM decides to close its U.S. factories and relocate its car manufacturing division to Mexico. • After quitting his job in Ohio to be closer to his family in California, Jake is now looking for a new job. A. Anton only B. Anton and Jake C. John only D. Jake only

D. Jake only FEEDBACK: Frictional unemployment occurs when there is a delay matching employers and employees. Jake falls into this category. Anton is an example of cyclical unemployment, and John is an example of structural unemployment.