CH15 Unemployment

CHANGE in Frictional comes from

Higher unemployment benefits (increases U), better job search (decrease U) called SECTIONAL SHIFT

POPULATION =

POPULATION = LF + INACTIVES

Participation Rate =

Participation Rate = LF/POPULATION x 100

Seasonal unemployment

Short term related to weather

Frictional unemployment

Short term unemployment (job shopping, entering labor market for first time, re-entering after long absence)

10. Each month, the Bureau of Labor Statistics calculates unemployment by a. surveying all workers in the economy. b. surveying a random sample of households. c. making projections based on census data. d. surveying large business and government employers.

a. surveying all workers in the economy.

Cyclical unemployment

Business cycle (recession, demand falls, hire fewer)

Structural unemployment

Medium to long term unemployment (lack of qualifications/geography, new tech replaces old tech)

CAUSE of Cyclical

Economy goes down

Measurement problems

Excludes discouraged workers, part-time is counted equally as full-time, and misrepresents 'actively searching' for job

CHANGE in Structural comes from

More educated labor force

CAUSE of Frictional

Imperfect information in job searching

Labor Force (LF) =

LF = EMPLOYED + UNEMPLOYED

CAUSE of Structural

Lack of worker qualifications

U-RATE =

U-RATE = UNEMPLOYED/LF x 100

CAUSE of Seasonal

Weather, tourism

13. Which of the following best explains why the rate of unemployment is highest among individuals aged 16 through 19? a. Teenagers do not have the skills necessary to find jobs. b. Teenagers change jobs more frequently than do older individuals. c. Recessions cause severe teenage unemployment. d. Most in this age group are in school and for this reason are not holding jobs.

a. Teenagers do not have the skills necessary to find jobs.

21. Economic theory suggests that frictional unemployment would a. decrease if methods of communicating job information among unemployed workers were improved. b. increase if methods of communicating job information among unemployed workers were improved. c. decrease if the legally established minimum wage were increased. d. decrease if unemployment benefits were increased.

a. decrease if methods of communicating job information among unemployed workers were improved.

5. Frictional unemployment is a result of a. difficulties in matching qualified workers with available jobs. b. inaccurate or costly information about job opportunities. c. slow or negative economic growth, as during a recession. d. not enough workers to fill available jobs.

a. difficulties in matching qualified workers with available jobs.

6. Structural unemployment is the result of a. not enough jobs for everyone to be employed. b. unemployed workers' skills not matching available jobs. c. a decline in the demand for labor, such as during a recession. d. temporary periods of unemployment while workers are changing jobs.

a. not enough jobs for everyone to be employed.

8. During the last several decades the labor force participation rate a. of women has increased substantially. b. of men has increased substantially. c. of women has persistently declined. d. of both men and women has persistently declined.

a. of women has increased substantially.

20. Higher unemployment insurance benefits tend to increase unemployment because they a. reduce the opportunity cost of job search and, hence, increase the search time. b. increase the opportunity cost of job search and, hence, increase the search time. c. reduce the opportunity cost of job search and, hence, decrease the search time. d. increase the opportunity cost of job search and, hence, decrease the search time.

a. reduce the opportunity cost of job search and, hence, increase the search time.

25. (I) Changes in the age composition of the labor force will affect the natural rate of unemployment (for example, an increase in the relative number of youthful workers). (II) Institutional changes such as an increase in the minimum wage may increase cyclical unemployment but will not affect the natural rate of unemployment. a. Both I and II are true. b. I is true; II is false. c. I is false; II is true. d. Both I and II are false.

b. I is true; II is false.

7. For the United States, which statement best characterizes the labor force participation rates of men and women over the past three decades? a. They have both increased. b. The participation rate of women has increased while the participation rate of men has decreased. c. The participation rate of women has decreased while the participation rate of men has increased. d. They have both decreased.

b. The participation rate of women has increased while the participation rate of men has decreased.

23. When people become unemployed because of a higher minimum wage, this type of unemployment is called a. frictional. b. structural. c. cyclical. d. abnormal.

b. structural.

16. How would the Bureau of Labor Statistics count a person not working who refuses an offer of employment to keep looking for a better job? a. not in the labor force b. unemployed c. employed d. a discouraged worker

b. unemployed

9. When information about potential jobs is costly to acquire and individuals must spend time searching for jobs, which type of unemployment will result? a. frictional b. seasonal c. structural d. cyclical

c. structural

24. The natural rate of unemployment is not zero because a. some workers will always have few skills. b. unemployment will always rise during the recessionary phase of the business cycle. c. the economy is characterized by dynamic change and imperfect information. d. not every member of society is capable of participating in the labor force.

c. the economy is characterized by dynamic change and imperfect information.

15. If a country's population (age 16 and over) is 50 million, with 2 million unemployed and 23 million currently holding jobs, the a. unemployment rate is 5 percent, and the labor force participation rate is 46 percent. b. unemployment rate is 8 percent, and the labor force participation rate is 46 percent. c. unemployment rate is 8 percent, and the labor force participation rate is 50 percent. d. unemployment rate is 4 percent, and the labor force participation rate 96 percent

c. unemployment rate is 8 percent, and the labor force participation rate is 50 percent.

4. Which of the following persons would be considered unemployed by the official government definition? a. George, a mathematician who returned to graduate school after failing to find a job the last four months b. Gwen, a medical student, who is still in college and is not working c. Morgan, who is employed part-time but desires a full-time job d. Ralph, an auto worker vacationing in Florida during a layoff at a General Motors plant due to an annual change-over in models

d. Ralph, an auto worker vacationing in Florida during a layoff at a General Motors plant due to an annual change-over in models Laid off is unemployed

1. Suppose there was a country with a population of 1000, of which 200 were unemployed and 500 were employed. Which of the following is true? a. The numbers have been calculated incorrectly as there are 300 people who are neither employed nor unemployed. b. The labor force participation rate is 50 percent. c. The unemployment rate is 20 percent. d. There are 700 individuals in this country's labor force.

d. There are 700 individuals in this country's labor force LF = UNEMPLOYED + EMPLOYED

19. Which one of the following would be classified as employed? a. a parent who works 50 to 60 hours per week caring for family members b. an auto worker vacationing in Florida during a layoff at a General Motors plant due to an annual change-over in models c. a 21-year-old full-time college student d. a 17-year-old high school student who works six hours per week as a route person for the local newspaper

d. a 17-year-old high school student who works six hours per week as a route person for the local newspaper

18. Which of the following would be classified as employed? a. a full-time college student working 5 hours a week at a part-time job b. a part-time sales clerk looking for a full-time job c. a 16-year-old high school student who delivers newspapers 5 hours a week d. all of the above

d. all of the above

22. Suppose that in 2001 the government decides to reduce unemployment benefits and simultaneously eliminate the State Employment Service, a government-provided service that matches employers and job seekers. As a result, frictional unemployment will probably a. increase. b. decrease. c. remain the same since neither action should affect frictional unemployment. d. change, but economic theory cannot predict the direction of the change since the two actions will exert opposite effects on frictional unemployment.

d. change, but economic theory cannot predict the direction of the change since the two actions will exert opposite effects on frictional unemployment.

2. The type of unemployment caused by changes in the business cycle is a. structural unemployment. b. natural unemployment. c. frictional unemployment. d. cyclical unemployment.

d. cyclical unemployment.

26. As the "baby boom" generation entered the labor market, youthful workers as a share of the labor force increased causing a(n) a. reduction in frictional unemployment. b. reduction in cyclical unemployment. c. reduction in actual unemployment. d. increase in the natural rate of unemployment.

d. increase in the natural rate of unemployment.

14. Frictional unemployment a. would be eliminated if the economy were more stable. b. would be eliminated if the minimum wage were raised. c. is the result of workers' skills not matching the jobs available. d. is present even when labor markets are working well.

d. is present even when labor markets are working well.

17. Which of the following would be officially classified as unemployed? a. a school administrator who has been working as a substitute teacher one day per week while looking for a full-time job in administration b. a mathematician who returned to graduate school after failing to find a job the last four months c. a 60-year-old former steel worker who would like to work but has given up actively seeking employment. d. none of the above

d. none of the above

11. In the early 1990s, the U.S. government substantially reduced defense expenditures. The resulting unemployment of defense-related workers, who possessed skills no longer needed by the economy, is an example of a. cyclical unemployment. b. frictional unemployment. c. seasonal unemployment. d. structural unemployment

d. structural unemployment.

12. In recent years, the introduction of new technological production methods has been rapid. The resulting unemployment of workers, without the skills necessary to operate and maintain high tech equipment, is an example of a. cyclical unemployment. b. frictional unemployment. c. seasonal unemployment. d. structural unemployment.

d. structural unemployment.