ECON chapter 21 review

8. What is the difference between being unemployed and being out of the labor force?

A person without a job must be willing and able to work and actively looking for work to be counted as unemployed; otherwise, a person without a job is counted as out of the labor force.

21. Name and explain some of the reasons why wages are likely to be sticky, especially in downward adjustments.

Economic laws and institutions. For low-skilled workers receiving minimum wage, it is illegal to reduce their wages. For union workers operating under a multiyear contract with a company, wage cuts might violate the contract and create a labor dispute or a strike.

17. Are U.S. unemployment rates typically higher, lower, or about the same as unemployment rates in other high-income countries?

It is lower compared to other countries

18. Are U.S. unemployment rates distributed evenly across the population?

No because the young are more likely unemployed than older individuals and those who are more educated are more likely to be employed than those who aren't.

24. Would you expect the natural rate of unemployment to be roughly the same in different countries?

No, because each country experiences different factors which influence the economy and its unemployment rate.

25. Would you expect the natural rate of unemployment to remain the same within one country over the long run of several decades?

No, because the economy experiences recessions.

10. Are all adults who do not hold jobs counted as unemployed?

No. Adults without jobs and who are not looking for work are out of the labor force.

14. What are some of the problems with using the unemployment rate as an accurate measure of overall joblessness?

Not all employments are recorded and some of the unemployment records may be accurate.

15. What criteria do the BLS use to count someone as employed? As unemployed?

People are counted as employed if the person holds a full time or part time paid job. A person is counted as unemployed if they do not have a job but are actively looking for one.

13. What happens to the labor force participation rate when employed individuals are reclassified as unemployed? What happens when they are reclassified as discouraged workers?

Since discouraged workers are no longer looking for employment, they are not counted as active in the labor force. This means that the headline unemployment rate, which is based solely on the active labor force number, do not take into account the number of discouraged workers in the country.

28. After several years of economic growth, would you expect the unemployment in an economy to be mainly cyclical or mainly due to the natural rate of unemployment? Why?

The unemployment in an economy would mainly be cyclical due to the recessions. However, if the economy grows in a steady and positive manner, unemployment may be due to natural rate of unemployment.

9. How do you calculate the unemployment rate? How do you calculate the labor force participation rate?

To determine the unemployment rate, divide the number of unemployed people (7.635 million) by the total labor force (157 million). Then, multiply by 100 to obtain the rate. Labor force participation rate is calculated by taking the number of people in the labor force, that is, the number employed and the number unemployed, divided by the total adult population and multiplying by 100 to get the percentage.

26. What is frictional unemployment? Give examples of frictional unemployment.

Unemployment that occurs as workers move between jobs. Some examples are quitting, termination, seasonal employment, term employment, and seeking a first-time job.

27. What is structural unemployment? Give examples of structural unemployment.

Unemployment that occurs because individuals lack skills valued by employers. Some examples are high school dropouts and companies downsizing.

19. When would you expect cyclical unemployment to be rising? Falling?

When would you expect cyclical unemployment to be rising? Falling?

11. If you are out of school but working part time, are you considered employed or unemployed in U.S. labor statistics? If you are a full time student and working 12 hours a week at the college cafeteria are you considered employed or not in the labor force? If you are a senior citizen who is collecting social security and a pension and working as a greeter at Wal-Mart are you considered employed or not in the labor force?

Your employed when working part time. If you are a student working in the college cafeteria are employed. If you are a senior collecting social security and a pension and work as a greeter at Wal-Mart, you are employed.

29. What type of unemployment (cyclical, frictional, or structural) applies to each of the following: a. landscapers laid off in response to a drop in new housing construction during a recession. b. coal miners laid off due to EPA regulations that shut down coal fired power c. a financial analyst who quits his/her job in Chicago and is pursing similar work in Arizona d. printers laid off due to drop in demand for printed catalogues and flyers as firms go the internet to promote an advertise their products. e. factory workers in the U.S. laid off as the plants shut down and move to Mexico and Ireland.

a. cyclical unemployment due to recession. b. structural unemployment due to industrial reorganization. c. frictional unemployment because of moving from one job to the next. d. cyclical unemployment due to drop in demand. e. structural unemployment.

16. Assess whether the following would be counted as "unemployed" in the Current Employment Statistics survey. a. A husband willingly stays home with children while his wife works. b. A manufacturing worker whose factory just closed down. c. A college student doing an unpaid summer internship. d. A retiree. e. Someone who has been out of work for two years but keeps looking for a job. f. Someone who has been out of work for two months but isn't looking for a job. g. Someone who hates her present job and is actively looking for another one. h. Someone who decides to take a part time job because she could not find a full time position.

b and e

20. Why is there unemployment in a labor market with flexible wages?

due to the unintended consequences of tight labor market restrictions

23. What forces create the natural rate of unemployment for an economy?

frictional and structural unemployment

22. What term describes the remaining level of unemployment that occurs even when the economy is healthy?

natural rate of unemployment

12. What happens to the unemployment rate when unemployed workers are reclassified as discouraged workers?

unemployment rate increases