ECON 260 Exam

After a financial crisis hits the country of Barbaria, 4 million people become unemployed. If 35 million individuals are lucky enough to keep their jobs, what is the unemployment rate? Please specify your answer to two decimal places. Unemployment Rate:

Unemployment Rate = Unemployed Force / Total Labor Force = 4,000,000/ 39,000,000 = 4/39 = 0.10256 = 0.10256*100 = 10.26%

Suppose that a baby boom occurs between the years 2025-2030, similar to the baby boom following World War II. What do you expect to happen to the labor force participation rate in the year 2090-2100, holding all else constant? The labor force participation rate will _________.

decrease since the baby boomers will opt for more leisure

The natural rate of unemployment equals

frictional unemployment + structural unemployment

The table shows employment statistics for a fictional country. Use the information to answer the questions. Round your percentages to two decimal places. Employed - 4505 Unemployed - 452 Not in the labor force - 581 a. What is the total labor force? b. What is the labor force participation rate? __________% c. What is the unemployment rate? _________% Suppose 256 of the 452 unemployed people have been unemployed for so long that they stop looking for work. d. What is the new labor force? e. What is the new labor force participation rate? ________% f. What is the new unemployment rate? ________%

A. 4505 + 452 = 4957 B. 4505 + 452 + 581 = 5538 4957 / 5538 = 0.89508 = 89.51% C. 452/ 4957 = 0.09118 = 9.11% D. 452 - 256 = 196 196 + 4505 = 4701 E. 4505 + 256 + 581 = 5282 4701/ 5538 = 0.84886 = 84.89% F. 196/ 4701 = 0.04169 = 4.17%

Please classify the given groups of people as either employed, unemployed or not in the labor force. 1. people temporarily away from their jobs due to illness 2. people in prison 3. people temporarily away from their jobs due to vacation 4. those who worked during the previous week 5. full-time home-makers 6. retirees who neither have a job nor are looking for a job 7. mental patients confined in institutions 8. people in active military service 9. people who do not have a job but actively looked in the last four weeks 10. full-time students 11. people who actively looked for a job during the last 12 months, but not the last four weeks

Employed: - (4) those who worked during the previous week - (1) people temporarily away from their jobs due to illness - (3) people temporarily away from their jobs due to vacation Unemployed: - (9) people who do not have a job but actively looked in the last four weeks Not in the Labor Force: - (10) full-time students - (8) people in active military service - (5) full-time home-makers - (2) people in prison - (6) retirees who neither have a job nor are looking for a job - (7) mental patients confined in institutions - (11) people who actively looked for a job during the last 12 months, but not in the last four weeks

Firms in the country of Merka, which experiences varying levels of unemployment over time, face a very competitive labor market. Classify the given events according to how each would affect Merka's unemployment rate. 1. introduction of employment-at-will doctrine 2. increase in the minimum wage 3. increase in unions' influence 4. decreased unemployment benefits

Increase in the Unemployment Rate: - increase in the minimum wage - increase in unions' influence Decrease in the Unemployment Rate: - decreased unemployment benefits - introduction of employment-at-will doctrine

The overall population for Region A is 110 million people. The labor force contains 40 million people, 26 million people are employed, and 14 million are unemployed. What is the unemployment rate? Round your answer to two decimals.

Unemployment Rate = Unemployed Force / Total Labor Force = 14,000,000/ 40,000,000 = 7/20 = 0.35 = 0.35*100 = 35%

Assume there is a global recession and millions of workers are laid off, yourself included. Rank the countries in the order of how easy it would be to find a job (ceteris paribus) using the rigidity of employment index data presented in the corresponding table (2009). Country Rigidity of employment index Bolivia 77 Spain 49 Austria 24 Denmark 7 United States 0 United Kingdom 10 How does a country's rigidity of employment index correspond to the amount of long-term unemployment for that nation? a. the larger the index number, the greater the long-term unemployment b. the smaller the index number, the greater the short-term unemployment c. the larger the index number, the greater the short-term unemployment d. the smaller the index number, the greater the long-term unemployment

[Easiest to find a new job] United States Denmark United Kingdom Austria Spain Bolivia [Hardest to find a new job] a. the larger the index number, the greater the long-term unemployment

Which of the choices is the best example of creative destruction? a. In the past month, there were 20,000 layoffs but 22,000 new hires. b. The prime minister signs into law that the minimum wage will go down by 50 cents. c. A chemical plant decides to use a new process in their reactions, which after combustion results in large amounts of pink smoke being emitted to the nearby town and consequent fires in the chemical plant. d. An antitrust suit is filed in court against a monopolist.

a. In the past month, there were 20,000 layoffs but 22,000 new hires.

Classify each scenario according to whether it is an example of an active employment at-will doctrine. a. A tenured organic chemistry professor who cannot be fired despite being a horrible teacher. b. Cathy quits her job as a babysitter despite having only been hired three weeks ago, because she feels watching over eight toddlers at once will cause her to lose too much sleep. c. Katherine, a waitress, gets fired from her job after spilling a hot bowl of French onion soup on a customer's shoe. d. Alex has a clause in his worker's contract stating that if he gets fired during a recession, he gets a severance package of half his salary paid for up to six months. e. Brian, who works for an educational software company, quits. He is not allowed to work for a competing software company for six months due to a clause in his contract. f. Wei-Cheng gets fired from his company for no reason other than that he is the only Asian worker.

a. Not an example of employment at-will b. Example of employment at-will c. Example of employment at-will d. Not an example of employment at-will e. Not an example of employment at-will f. Not an example of employment at-will

Which of the factors would decrease the rate of frictional unemployment? a. the advent of the Internet, which makes finding available jobs easier b. increased short-term unemployment benefits c. an increase in the number of jobs available due to an increase in GDP d. improvements in technology that make skills which were once valued by employers obsolete

a. The advent of the Internet, which makes finding available jobs easier.

When the economy is doing well, a significant share of unemployment is frictional. a. true b. false

a. True

Suppose the civilian noninstitutionalized working-age population is 35.9 million in Italy. Of these, 4.9 million are working part-time and 14.53 million are working full-time. Assume the Bureau of Labor Statistics (BLS) definitions are used for calculating unemployment data. Among those not working, the most recent job-search activity for 2.90 million happened less than two weeks ago, while 1.72 million most recently looked for work between two and four weeks ago. An additional 0.86 million most recently looked for work five weeks ago, and the remaining 10.99 million who do not have jobs have not looked for work in the past six weeks. Round your answers to two decimal places. a. What is the size of the total labor force? b, How many people are unemployed? c. What is the labor force participation rate? d. What is the unemployment rate?

a. Unemployed +Part time workers + Full time workers = (2.9 + 1.72) + 4.9 + 15.53 = 24.05 million b. [Those who have looked for work in the last 4 weeks] 2.9 + 1.72 = 4.62 million c. Labor force/Population 24.05/35.9 = 0.6699 = 66.99% d. Unemployed/Labor Force = 4.62/24.05 = 0.19209 = 19.21%

Please match each scenario with the term it best identifies. a. The government implements a new policy where people receiving unemployment benefits must provide proof that they are searching for work. Otherwise, they will lose their benefits in 1 month. b. The government decides to give all unemployed workers a free account on a federal job bank, allowing workers to find jobs easier than ever before and hopefully expediting re-employment. c. Chelsea recently lost her job as an accountant. However, thanks to her stellar resume, she is able to quickly find a new job after two weeks. Much to her pleasure, she receives a tax credit because she was able to quickly find a new job. d. Simon is a junior chef at a three-star Michelin-renowned restaurant, Sur La Table. He loses his job and applies for, and is accepted into, a state funded program that allows unemployed individuals to take medical technician courses at their local community colleges for free.

a. work test b. job-search assistance c. early employment bonus d. job retraining

Comparison of the minimum wage and the median wage can be used to estimate the extent to which unemployment results from minimum wage laws. All else equal, which scenario would result in the most unemployment? a. A country where the minimum wage is set at 60% of the median wage. b. A country where the minimum wage is set at 95% of the median wage. c. A country where the minimum wage is set at 1% of the median wage. d. A country where the minimum wage is set at 10% of the median wage.

b. A country where the minimum wage is set at 95% of the median wage.

The hypothetical data in the table below displays the percentage that unemployment benefits replace take-home pay for workers in different countries. ________________________________________________________________________ Country First year Second year After five years Belgium 75% 70% 61% Finland 70% 60% 55% Italy 54% 50% 22% Australia 40% 25% 10% ________________________________________________________________________ Note: The data cover a worker with a dependent spouse and are net rates after taking into account taxes and other means-tested benefits. Which country would you expect to have the lowest long-term unemployment rate? a. Italy b. Finland c. Australia d. Belgium

c. Australia

Employment laws can vary significantly by country. For instance, in the United States, many jobs are governed by the principle of employment at-will. Employment at-will is rarer in certain countries in Europe, such as Portugal. Regulation and collective bargaining impact labor markets to a larger extent in Europe than in the United States. How do European labor markets compare to the labor market in the United States as a result of these varying labor laws? a. During a period of increased demand, European firms are more likely to hire more workers. b. Europe has a lower rate of long-term unemployment than the United States. c. The labor market in Europe is less flexible than in the United States. d. The hiring and firing costs are lower in Europe than the United States.

c. The labor market in Europe is less flexible than in the United States.

The typewriter industry goes bankrupt and lays off all its workers. In sharp contrast, the burgeoning electronic word processing industry hires 10,000 workers that same year. This type of unemployment resulting from the shift in industries would best be categorized under a. frictional unemployment b. cyclical unemployment c. structural unemployment

c. structural unemployment

Which of the choices is most directly related to cyclical unemployment? a. the age distribution of the country b. an increased use of the Internet for job searches c. an increase in the number of new college graduates looking for work d. recessions

d. recessions