Macro Economics Quiz 6

ANSWER: 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 are over employed. So the unemployment rate must be lower than the natural rate of unemployment and cyclical unemployment will not be positive.

If the real GDP in a country is at a higher output level than full employment output, then 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.

ANSWER: D. someone already employed or actively seeking work.

A member of the labor force is defined as: A. someone who is employed. B. someone who is above the age of 16. C. someone who is employed on a part-time basis. D. someone already employed or actively seeking work. E. someone already employed on a full-time basis.

ANSWER: C. Structural FEEDBACK: Creative destruction occurs when the introduction of new products and technologies leads to the end of other industries and jobs. As some jobs become obsolete, the result is structural unemployment, which is caused by changes in the industrial makeup (structure) of the economy. Although structural unemployment can cause transitional problems, it is often a sign of a healthy, growing economy.

Creative destruction would be associated with which of the following types of unemployment? A. Frictional B. Cyclical C. Structural

ANSWER: C. falls toward zero.

During healthy economic periods, cyclical unemployment: A. rises. B. will equal structural unemployment. C. falls toward zero. D. will equal frictional unemployment. E. will equal the natural rate of unemployment.

ANSWER: E. potential GDP.

Economists refer to full-employment output as: A. gross domestic product (GDP) per capita. B. natural GDP. C. real GDP. D. nominal GDP. E. potential GDP.

ANSWER: B. workers take time to decide which job is best for them.

Frictional unemployment is present in an economy because: A. workers often need to update their skills. B. workers take time to decide which job is best for them. C. firms often lay off workers due to economic recession. D. the unemployment rate is too low. E. there are often changes in the industrial makeup of an economy.

ANSWER: D. all of the above.

Gallup, Inc. is a very prestigious polling company. Why did the C.E.O. of Gallup say that the official unemployment rate of 5.6%, as reported by the US Department of Labor, was a "lie?" A. it does not count people who have given up looking for a job. B. it counts part-time workers as fully employed (even if they work only one hour per week). C. the White House was trying to score political points. D. all of the above.

ANSWER: B. raise frictional unemployment.

More generous unemployment insurance would: A. raise structural unemployment. B. raise frictional unemployment. C. lower structural unemployment. D. lower frictional unemployment.

ANSWER: E. unemployment insurance creates an indirect incentive that can make it more attractive for workers to stay unemployed.

One argument against unemployment insurance is that: A. unemployment insurance limits the effects of a recession. B. unemployment insurance is only available during recessions. C. unemployment insurance creates an indirect incentive that can make it less attractive for workers to stay unemployed. D. unemployment insurance can be extended by the government during times of recession. E. unemployment insurance creates an indirect incentive that can make it more attractive for workers to stay unemployed.

ANSWER: B. Increased/Decreased FEEDBACK: Notice the trend lines for black women and white women both start below 50% in 1972. By 2015, the labor force participation rate among women is near 55-60%. Men have seen the opposite with a labor force participation rate above 70% in the 1970s to near or below 70% in the 2000s.

Since 1972, labor force participation among women has generally ___________ while labor force participation among men has generally ___________. PRINECOMI2_FIG07_SNAPSHOTcopy A. Decreased/Increased B. Increased/Decreased C. Decreased/Decreased D. Increased/Increased

ANSWER: A. the economy is expanding beyond its long-run capabilities.

When actual unemployment is less than its natural rate: A. the economy is expanding beyond its long-run capabilities. B. the economy is producing within its long-run capabilities. C. the numbers must be wrong because the actual unemployment rate can never be less than the natural rate. D. the economy is in a recession. E. the economy must be experiencing high inflation.

ANSWER: E. frictional, structural, and cyclical

Which of the following lists the three types of unemployment? A. frictional, structural, and practical B. practical, structural, and cyclical C. frictional, unavailable, and structural D. cyclical, practical, and unavailable E. frictional, structural, and cyclical

ANSWER: C. (ii) and (iii) only

All else equal, which of the following would increase the unemployment rate? (i) an increase in the number of women who return to work after being stay-at-home mothers (ii) a preference among older men to retire early (iii) an increase in the maximum number of weeks for which someone can receive government unemployment benefits (iv) an increase in the number of previously unemployed women who stop looking for work and become discouraged workers A. (i) and (ii) only B. (iii) only C. (ii) and (iii) only D. (ii), (iii), and (iv) only

ANSWER: C. longer the duration of each spell of unemployment and the higher the unemployment rate.

Economists would predict that, other things the same, the more generous unemployment compensation a country has, the: A. shorter the duration of each spell of unemployment and the higher the unemployment rate. B. shorter the duration of each spell of unemployment and the lower the unemployment rate. C. longer the duration of each spell of unemployment and the higher the unemployment rate. D. longer the duration of each spell of unemployment and the lower the unemployment rate.

ANSWER: A. 258 million.

If the unemployment rate is 5.8% and the number of unemployed persons is 15 million, the labor force is approximately: A. 258 million. B. 25.8 million. C. 87 million. D. 870 million. E. 2.6 million.

ANSWER: C. Jenny counts as employed FEEDBACK: Jenny is in the labor force and she is employed. If she weren't getting paid to do the same work (for example, if she were the owner of the house and was doing all of the same work while looking for an outside job), she would be counted as unemployed..

Jenny works in the house as a nanny. She gets paid once a month by the owner of the house. Since she thinks that is a lot of work, she's looking for another job. Therefore we can say that: A. Jenny is not in the labor force B. Jenny is considered as unemployed because she is looking for another jobs C. Jenny counts as employed D. Jenny is the house owner.

ANSWER: B. cyclically unemployed.

Some individuals are unemployed because they are laid off from their job when the economy is sluggish. These individuals would be considered: A. frictionally unemployed. B. cyclically unemployed. C. structurally unemployed. D. overemployed. E. discouraged workers.

ANSWER: B. unemployment caused by changes in the industrial makeup of an economy.

Structural unemployment is: A. unemployment caused by time delays in matching available jobs with workers. B. unemployment caused by changes in the industrial makeup of an economy. C. unemployment caused by economic downturns. D. when a worker stops looking for a job because he feels no job is available for him. E. not one of the three types of unemployment.

ANSWER: A. how the economy recovered after the recessions had officially ended.

The big difference between the Great Recession and the recession of 1982 was: A. how the economy recovered after the recessions had officially ended. B. the increase in the unemployment rate that occurred during each recession. C. the quarterly real gross domestic product (GDP) growth rates at the official start of each recession. D. the length of each recession. E. the total decline in the economy during each recession.

ANSWER: B. number of people employed plus the number of people unemployed.

The labor force equals the: A. number of people employed. B. number of people employed plus the number of people unemployed. C. number of people employed plus the number of people unemployed plus teenagers between ages 14 and 16 who work at least 10 hours a week. D. adult population.

ANSWER: 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, 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.

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%.

ANSWER: A. frictional and structural

Which of the following two types of unemployment occur even when the economy is healthy and growing? A. frictional and structural B. cyclical and frictional C. structural and cyclical D. frictional and practical E. structural and practical

ANSWER: C. More and more stay at home moms coming back into the labor force in the search of jobs FEEDBACK: Someone who is unemployed is someone who is available for work and is looking for work. The unemployment rate can fall if some people who were looking for jobs become discouraged and give up looking for work. 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.

Which of the following would not be responsible for a drop in the unemployment rate? A. There is an increase in the number of discouraged workers. B. People with full time jobs take early retirement. C. More and more stay at home moms coming back into the labor force in the search of jobs

ANSWER: E. structurally unemployed.

Workers who lose their jobs because the skill set they possess is no longer required in the economy are considered to be: A. discouraged workers. B. cyclically unemployed. C. frictionally unemployed. D. overemployed. E. structurally unemployed.

ANSWER: A. Structural FEEDBACK: The steel and coal industry closed down in Allentown, causing workers to seek new employment. They don't necessarily have the skills to match new jobs, meaning this represents structural unemployment. The song "Allentown" expresses how difficult it is for small communities when people have to adjust to changes in the structure of an economy. The focus of the song is on structural unemployment, which arises from factories closing in the town. Because the whole town was dependent on the factories, which were the biggest employers, after they closed, there were far fewer job opportunities for people in the community. Thus, Billy Joel sings about needing to find a new place to live. Structural unemployment may be a sign of a growing and dynamic economy, but it causes real pain for people who are caught in the middle of a dying industry.

n his song "Allentown," Billy Joel sings about the demise of the steel and coal industry in Pennsylvania. In areas like Allentown and much of the Midwest, manufacturing was once the largest employer, but many of those jobs have disappeared as technology has changed. What type of unemployment is the song about? A. Structural B. Frictional C. Cyclical