Ch 7 Practice Quiz Concept Check: Econ

Which of the following can be responsible for a drop in the unemployment rate?

There is an increase in the number of discouraged workers. Feedback A rise in the number of people employed can occur for several reasons. The number of people unemployed can fall because people who were looking for jobs got them. The labor force might also have become larger because new people have joined. A combination of the two is also possible. All these changes will reduce the unemployment rate.Another way the unemployment rate can fall is 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.

Technological advancements in online banking, have led to its widespread use. As a result, many bank tellers have become unemployed. This is an example of __________ unemployment.

structural Feedback: Structural unemployment is caused by changes in the industrial make-up or structure of the economy. Technological advancements in online banking have made the jobs of many bank tellers obsolete.

Which of the following can lower the level of frictional unemployment over time?

An increase in the number of online job search engines Feedback Frictional unemployment occurs because of delays in matching workers to jobs. With more online job search engines, workers and employers will find each other more quickly. This will lower the level of frictional unemployment.

If the real GDP in a country is at a higher output level than full employment output, then which of the following is true? i. The unemployment rate is greater than the natural rate. ii. The unemployment rate is lower than the natural rate. iii. The cyclical unemployment rate is positive. iv. The cyclical unemployment rate is negative.

ii and iv 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 must be negative.

Which of the following represents frictional unemployment? i. The demand for refrigerators falls when the economy enters a recession and refrigerator manufacturers lay off some of their workers. ii. General Motors decides to close its U.S. factories and relocate its car manufacturing division to Mexico. iii. After quitting your job in Ohio to be closer to your family in California, you are now looking for a new job. iv. Carla's boss recently fired her for doing a poor job and she hasn't yet found a new one.

iii and iv Feedback: Frictional unemployment occurs when there is a delay matching employers and employees. Both choices iii and iv fall in this category. Choice i is an example of cyclical unemployment, and choice ii is an example of structural unemployment.

Refer to the table below. Calculate the labor force participation rate for this economy. Category Number of people (millions) Institutionalized 14 Full-time workers 113 Less than 16 years of age 40 Armed forces (non-civilian)20 Part-time workers 27 Population 314 Looking for work 14

64.17% Feedback Remember the formula for the labor force participation rate: Labor force participation rate = (labor force/working-age population) x 100 where labor force = number employed + number unemployed. To solve this problem you need to know the number of people employed, the number of people looking for work, and the working-age population. The table shows you that the number of people employed is equal to part-time workers plus full-time workers = 27 + 113 = 140. The table also lists the number of people looking for work who will be counted as unemployed: 14 million. Since the labor force = number employed + number unemployed or 140 + 14, 154 million people are in the labor force. The working-age population includes those who are 16 years or older, not institutionalized and not in the armed forces. Based on the information in the table, working-age population = 314 - (40 - 14 - 20) = 240. Plugging the labor force and the working-age population figures into the equation for labor-force participation rate, we get Labor force participation rate = labor force ÷ working age population × 100= (154÷240) x 100 = 64.17%.

Refer to the following table below. Calculate the unemployment rate for this economy based on the data provided. Category Number of people (millions) Institutionalized 14 Full-time workers 113 Less than 16 years of age 40 Armed forces (non-civilian) 20 Part-time workers 27 Population 314 Looking for work 14

9.1% Feedback Remember the formula for the unemployment rate:unemployment rate = (number unemployed/labor force) x 100 [replace with where labor force = number employed + number unemployed. To solve this problem, you need to know the number of people employed and the number of people unemployed. The table provides the number of part-time and full-time workers. The number employed is equal to part-time workers plus full-time workers = 27+113 = 140. The table also tells you 14 million people are looking for work; this group should be counted as unemployed. The total labor force = employed + unemployed Labor force =140 + 14 = 154. Based on the equation for the unemployment rate we see that Unemployment rate = (number unemployed ÷ labor force) × 100= (14 ÷ 154) x 100 = 9.1%.

Which of the following is true when the economy is at full employment?

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.

Refer to the table below. If 4 million of those who are currently unemployed become discouraged workers, the unemployment rate will _______________. Category Number of people (millions) Institutionalized 14 Full-time workers 113 Less than 16 years of age 40 Armed forces (non-civilian) 20 Part-time workers 27 Population 314 Looking for work 14

decrease to 6.7% Feedback Remember the formula for the unemployment rate: Unemployment rate = (number unemployed/labor force) x 100 where labor force = number employed + number unemployed.T This question requires you to calculate (1) the unemployment rate before the workers become discouraged and (2) the current unemployment rate. To calculate the unemployment rate before workers become discouraged, begin by calculating the number of employed workers. Looking at the table, we see that the number employed is equal to part-time workers plus full-time workers = 27 + 113 = 140. The question tells you that 14 million people are looking for work. They will be counted as unemployed until they become discouraged workers. Therefore, the previous labor force = 140 + 14 = 154, and the unemployment rate before workers become discouraged = (14 ÷ 154) x 100 = 9.1%. To calculate the current unemployment rate, begin by considering the 4 million people who become discouraged, stop looking for jobs, and drop out of the labor force. When we account for the discouraged workers, the number of unemployed = 14 million - 4 million = 10 million. The new labor force = 140 + 10 = 150. Therefore, the new unemployment rate = (10÷150) x 100 = 6.7%. Thus we can see that the unemployment rate decreases to 6.7%.

Bonnie Austin, age 30, used to work part time in a local restaurant. This year she quit her job to take care of her five-month-old daughter. She is currently not looking for a job. The survey conducted by the Bureau of Labor Statistics today will count Bonnie as

not in the labor force. Feedback Remember that a person will be counted as unemployed only if he or she is actively seeking work. Stay-at-home parents are not counted as unemployed because they are not looking for work. Bonnie will not be counted a part of the official labor force until she decides to go back to work.