ECON 510 Chapter 7

Short-term unemployment is most likely to be ______ unemployment, while long-term unemployment is mostly likely to be _____ unemployment.

frictional; structural

In the case of unions, the conflict of interest between different groups of workers results in insiders wanting ______, while outsiders want ______.

high wages; more hirings

Sectoral shifts:

make frictional employment inevitable

When insiders have a much greater impact on the wage-bargaining process than do outsiders, the negotiated wage is likely to be ______ the equilibrium wage.

much greater than

In a steady state:

the number of people finding jobs equals the number of people losing jobs.

If the number of employed workers equals 200 million and the number of unemployed workers equals 20 million, the unemployment rate equals ______ percent (rounded to the nearest percent).

9

Wage rigidity:

prevents labor demand and labor supply from reaching the equilibrium level.

Any policy aimed at lowering the natural rate of unemployment must either ______ the rate of job separation or ______ the rate of job finding.

reduce; increase

When there is structural unemployment, the real wage is:

rigid at a level above the market-clearing level

If s is the rate of job separation, f is the rate of job finding, and both rates are constant, then the unemployment rate is approximately:

s/(s + f).

Unemployment insurance increases the amount of frictional unemployment by:

softening the economic hardship of unemployment.

The unemployment resulting from wage rigidity and job rationing is called ______ unemployment.

structural

The unemployment resulting when real wages are held above equilibrium is called ______ unemployment, while the unemployment that occurs as workers search for a job that best suits their skills is called ______ unemployment.

structural; frictional

The natural rate of unemployment is:

the average rate of unemployment around which the economy fluctuates.

Frictional unemployment is inevitable because:

the demand for different goods always fluctuates.

One efficiency-wage theory implies that firms pay high wages because:

the more a firm pays its workers, the greater their incentive to stay with the firm

All of the following are reasons for frictional unemployment except:

unemployed workers accept the first job offer that they receive

If the steady-state rate of unemployment equals 0.10 and the fraction of employed workers who lose their jobs each month (the rate of job separations) is 0.02, then the fraction of unemployed workers who find jobs each month (the rate of job findings) must be:

0.18

Economists who have studied minimum-wage laws in the United States find that a 10 percent increase in the minimum wage increases teenage unemployment by about:

1 to 3 percent.

If the fraction of employed workers who lose their jobs each month (the rate of job separations) is 0.01 and the fraction of the unemployed who find a job each month is 0.09 (the rate of job findings), then the natural rate of unemployment is:

10 percent

Which of the following is an example of frictional unemployment?

Dave searches for a new job after voluntarily moving to San Diego.

Which of the following is the best example of structural unemployment?

Kirby is seeking a job as an airline pilot, but the high union wages in the industry have limited the number of jobs available

Unions contribute to structural unemployment when collective bargaining results in wages:

above the equilibrium level

If wage rigidity holds the real wage above the equilibrium level, an increase in the demand for labor will ______ the number unemployed.

decrease

Unemployment caused by the time it takes workers to search for a job is called ______ unemployment.

frictional

The minimum wage:

has its greatest impact on teenage unemployment.

If wage rigidity holds the real wage above the equilibrium level, an increase in the supply of labor will ______ the number unemployed.

increase

All of the following statements about minimum-wage workers in the United States are correct except:

minimum-wage workers are more likely to be male

When outsiders have a greater role than do insiders in the wage-bargaining process, the negotiated wage is likely to be ______ the equilibrium wage.

much closer to

All of the following policies were adopted by the government in an attempt to reduce the natural rate of unemployment except:

unemployment insurance

A policy that increases the job-finding rate _____ the natural rate of unemployment.

will decrease