Chapter 09 Quiz
Structural unemployment is the unemployment that arises ____________.
when wage rigidity creates a persistent gap between labor supply and labor demand
The economy witnessed the sharpest change in the unemployment rate from ____________. Use the data on the size of the labor force and potential workers to compute the percentage of adults out of the labor force for the year 2010. The percentage of adults out of the labor force in 2010 was Which of the following is not one of the general trends that you observed in the table?
2008 to 2009 as a result of the financial crisis that hit the United States starting in late 2007. 35.30% There has been a steady increase in both the size of the adult population and the labor force participation rate between 2005 and 2015
Suppose Die Cast Aluminum Co. is a subcontractor for the auto industry and makes specialized auto parts. There is a bracket it manufactures that it sells for $2.00. The following table shows the number of brackets that can be produced from a given number of labor hours. Assume that the company cannot hire labor for a fraction of an hour. Hours of Labor Output 0 0 1 50 2 90 3 120 4 140 5 150 6 155 7 157 The marginal product of labor for the sixth hour of labor is __ The value of the marginal product of labor for the sixth hour of labor is __ If the wage paid to workers in Die Cast's plant is $25/hour, it should employ __workers. If the wage is $25/hour, but the price of a bracket declines to $1.50, it should employ__ workers.
5 10.00 4 4 4
The quantity of labor supplied at the market-clearing wage is _______ thousand, and the quantity of labor supplied at union pay of $10 is _______ thousand. The quantity of labor demanded at the market-clearing wage is _______ thousand, and the quantity of labor demanded at union pay of $10 is _______ thousand. Using your graph, the introduction of union pay of $10 per hour leads to__ unemployment equal to thousand.
6.0; 10 6.0; 2 structural 8.0
Which of the following factors does not cause a shift in the labor demand curve?
Changes in the wage rate.
The period from 2007 to 2009 was a time of economic contraction that came to be known as the "Great Recession." During periods of recession, most firms experience a decline in demand for their product, as well as a decline in the product's equilibrium price. All other things being equal, macroeconomic theory predicts that the wage of most workers should decline in recessionary periods. However, this was not the case in the Great Recession, or during many other economic downturns throughout recent history. Based on the discussion in the chapter, explain why this might be so, and what the implications are for unemployment.
During downturns workers are resistant to the lowering of wages and firms try to avoid doing so. This downward wage rigidity keeps the quantity of labor supplied greater than demand, causing unemployment.
According to salary.com, the average salary for a software engineer level III (a higher-level position in software design and implementation) in the Silicon Valley area of California is $108,244. However, Google pays its level III software engineers an average salary of $124,258. Why does Google pay a salary higher than the equilibrium salary for equivalent positions in the same area?
Google is paying an efficiency wage in order to minimize worker turnover, increase worker productivity, and attract the top talent.
In February 2014, the United States added 175,000 jobs to the economy. Given this information, what can we say about the unemployment rate of the country? Suppose that in January there were 5,00,000 workers in the labor force, with 4,670,000 employed and 330,000 unemployed, implying a 6.6 percent unemployment rate. A month later, there were 5,170,000 workers in the labor force, with 4,845,000 employed and 325,000 unemployed. (Notice the number employed went from 4,670,000 to 4,845,000, an increase of 175,000.) The unemployment rate in February is
It may increase, decrease, or not change depending on how many people started searching for jobs during the month. 6.29%
Which of the following is true regarding wage rigidity? Which of the following is not one of the factors that can increase wage rigidity in the labor market?
It occurs when wages are held fixed above the competitive equilibrium level. Government taxation of labor income
Which of the following is not true regarding the natural rate of unemployment?
The natural rate of unemployment is 0 percent when the U.S. economy is not in a recession.
In April 2012, the Bazanian Daily, a leading newspaper in the country of Bazania, carried a report titled "20,000 jobs added in the last quarter; unemployment rate shoots up from 5 percent to 6.7 percent." How could the unemployment rate in Bazania increase even when new jobs were created?
The new jobs may have made discouraged workers optimistic enough to start applying for jobs, thus re-entering the labor force and being counted as unemployed, which causes the overall unemployment rate to increase.
In a recent study for the National Bureau of Economic Research (NBER), four researchers looked at the effect of generous unemployment benefits on the local unemployment rate. They compared the unemployment situation in adjoining counties, which happened to lie in two different states that had different laws regarding the amount and duration of unemployment benefits. (Re-read the section on "A Natural Experiment of History" in Chapter 8 of the text to understand how the NBER research is based on a "natural experiment.") The authors of the NBER study found that the unemployment rate "rises dramatically in the border counties belonging to the states that expanded unemployment benefit duration" during the Great Recession. Why might this be so?
With the longer duration of unemployment benefits, firms needed to keep wages high to attract people to work. This caused downward wage rigidity, leading to persistent higher unemployment.
The goal of a country with a healthy economy is to have ____________ equal to zero.
cyclical unemployment.
After 17 months of unsuccessfully submitting job applications, one unemployed worker wrote that "nothing stops the omnipresent feeling of loneliness, worthlessness, and desperation." Every month, statistics on employment and unemployment are compiled by the Bureau of Labor Statistics. The following table is an excerpt from the www.bls.gov website Table A-12. The table shows the average (mean) duration of unemployment (seasonally adjusted) in the most recent months. Based on the table, the 17 months that the unemployed worker has been looking for a job is __the average duration of unemployment in recent months. For each description, identify whether this is an example of structural unemployment or frictional unemployment. (Enter S for structural and F for frictional.) The worker passed on many job offers that did not seem interesting enough for him in the hopes of finding the perfect job. The worker is a low-skilled worker who would work for a low wage, but minimum wage laws have limited the number of jobs available. The worker is a union member, and the union has bargained wages high enough that firms in the market are hiring fewer workers. The worker's firm uses efficiency pay, resulting in less hiring by firms and less turnover by workers.
higher than F S S S
When there is an increase in the wage rate paid to workers, the supply of labor will ____________. When there is an increase in acceptance of people taking 5 or 6 years to earn their college degrees instead of 4 years, the supply of labor will ____________.
increase and move up along the curve decrease and shift to the left
Explain whether each of these individuals will be counted as a part of the labor force. Alex recently retired after working for the same company for 30 years. John is a full minus time stay minus at minus home parent while his wife works. We know that Alex is ____________, and we know that John is ____________.
not in the labor force; not in the labor force
The fact that unemployment is lower among workers with a relatively higher level of education can be explained in part by the ___ What other reasons might explain why unemployment is lower among workers with a relatively higher level of education?
principle of optimization More educated workers have a higher opportunity cost of time. More educated workers have more human capital. Workers with a higher level of education are in greater demand by firms.
In macroeconomics, a "leading indicator" is defined as a measurable economic variable that changes prior to when the economy as a whole starts to follow a given trend. Conversely, a "lagging indicator" is a measurable variable that only changes in the latter phaseslong dash or even afterlong dash an overall trend is evident in the economy. The following chart shows the evolution of the U.S. unemployment rate from January 1948 to January 2014 (monthly data). Note that the shaded bars are recessions and that the unemployment rate increases during recessions. Using the chart above, would you describe unemployment as a leading or lagging indicator of an economic downturn?
Lagging, since in every recession the unemployment rate did not peak until very late into the recession, or in some cases, after the recession
According to the graph, when the minimum wage is set at $9per hour, there will be ____________ unemployment of ____________ workers in this market. The losers when the minimum wage is $9 would be ___________. Using the graph, we can see that if the minimum wage were set at $5 per hour, then ____________. The impact of the minimum wage on the labor market as a whole is__, since __of workers earn the minimum wage rate.
structural; million firms that hire low-skill workers at the new wage. low-skill workers who now cannot find jobs due to increased competition for jobs low-skill workers who lose their jobs due to a lack of demand for workers modest; around 1 percent
