MACROECON chapter 15
If an unemployed person quits looking for work, then, eventually the unemployment rate
and the labor-force participation rate both decrease
Are people more or less affected by minimum wage?
fewer people are affected by minimum wage (downward slope)
theory of efficiency wages
firms voluntarily pay above-equilibrium wages to boost worker productivity
natural unemployment -<
frictional and structural
Providing training for unemployed individuals is primarily intended to reduce
frictional unemployment
most recent high unemployment rate
was 10% in 2010
reasons why firms may pay high wages
worker turnover, worker quality, worker effort
insiders
workers still employed are better off
outsiders
workers who lose their jobs are worse off
Cyclical unemployment refers to
year-to-year fluctuations of unemployment around its natural rate
Refer to Figure 28-3. If the government imposes a minimum wage of $4 (price floor), how many workers will be unemployed?
zero
The Bureau of Labor Statistics reported in 2005 that there were 28.19 million people over age 25 who had no high school degree or its equivalent, 11.73 million of whom were employed and 1.04 million of whom were unemployed. What were the labor-force participation rate and the unemployment rate for this group?
45.3% and 8.1%
the highest minimum wage in nominal terms was
9% in the late 60s
Suppose that the adult population is 6 million, the number of employed is 3.8 million, and the labor-force participation rate is 70%. What is the unemployment rate?
9.5%
John is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a firm that better matches his tastes and skills. Curtis has looked for work as an accountant for some time. While the demand for accountants does not appear to be falling, there seems to be more people applying than jobs available
John is frictionally unemployed, and Curtis is structurally unemployed
unemployment insurance
a government program that partially protects workers' incomes when they become unemployed
union
a worker association that bargains with employers over wages, benefits, and working conditions
Wages in excess of their equilibrium level help explain
both structural unemployment and the natural rate of unemployment
sectoral shifts
changes in the composition of demand across industries or regions of the country
unemployment -<
cyclical and natural
unemployment rate excludes
discouraged workers (also doesn't distinguish b/w full and part-time work)
The designation "natural" implies that the natural rate of unemployment
does not go away on its own even in the long run
the decade of the 90's
had a high participation rate and has since decreased
Satchel loses his job and immediately begins looking for another. Other things the same, the unemployment rate
increases, and the labor-force participation rate is unaffected
labor force participation rate for men
is downward sloping
frictional unemployment longevity
is short term
labor force participation rate for women
is upward sloping
structural unemployment longevity
is usually longer term
Which of the following is not an explanation for the existence of structural unemployment?
job search
unemployment is when
labor supply > labor demand
higher education level
means less unemplyment
what are causes of structural unemployment?
minimum wage law, unions, efficiency wage
there has been a natural decline in
natural unemployment rate (recently)
An economist claims that changes in information technology and unemployment insurance have reduced unemployment. Which of these changes affect frictional unemployment?
neither the changes in information technology nor the changes in unemployment insurance
not in the labor force
not employed and are not unemployed (not looking for a job)
unemployment rate =
number of unemployed/labor force x 100
structural unemployment
occurs when there are fewer jobs than workers
frictional unemployment
occurs when workers spend time searching for the jobs that best suit their skills and tastes
unemployed
people who are not employed but want to work and are looking for a job
employed
people who work
what can unemployment insurance do?
reduce uncertainty over incomes, give unemployed more time to search, increase frictional unemployment (making workers less willing to accept jobs)
Since the 1940's U.S. union membership has
risen, this increase should have raised structural unemployment
People who are unemployed because wages are, for some reason, set above the level that brings labor supply and demand into equilibrium are best classified as
structurally unemployed
cyclical unemployment
the deviation of unemployment from its natural rate and is associated with business cycles
natural rate of unemployment
the normal rate of unemployment around which the actual unemployment rate fluctuates
labor force
the number of employed plus the number of unemployed
unemployment rate
the percentage of labor force that is unemployed
labor-force participation rate
the percentage of the total adult population that is in the labor force (the fraction of the population that has chosen to participate in the labor market)