econ test 3

What has happened to growth rates in Western Europe and the United States in recent years?

Growth has slowed in recent years in both Western Europe and the United States.

A compositor loses her job because the work is now outsourced to India.

Structrual

A steelworker loses his job because steel is now produced in foreign countries with lower wages.

Structrual

An unemployed person turns down job offers that do not pay the wages of his previous job.

Structrual

Distinguish between structural unemployment and cyclical unemployment.

Structural unemployment is unemployment caused by the institutional structure of an economy or by economic restructuring making some skills obsolete, whereas cyclical unemployment is unemployment resulting from fluctuations in economic activity. A fall in structural unemployment requires structural changes; a fall in cyclical unemployment does not.

What type of unemployment is best studied within the long-run framework?

​​Structural unemployment, which results from changes in the structure of the economy, is best studied in the long-run framework. It is not cyclical because cyclical unemployment goes up and down with the business cycle.

1. What happened to the duration of unemployment during the 2008-2009 recession and what is the likely reason?

The duration of unemployment rose in the 2008-2009 recession. The likely cause was that people were unable to find comparable jobs at comparable pay to the one that they had lost.

Name five reasons why the target rate of unemployment has fluctuated over the past 40 years.

(1) the population has become younger, (2) more women have entered the workforce, (3) unemployment benefits and welfare have been implemented, and (4) globalization.(5) Technology

Since a jobs program puts people to work, would it impose costs on society?

Any jobs program will impose some cost to society. One cost that any program incurs is administrating the program. To the extent that people choose the program rather than an open position, the lost output is another cost. Other costs depend upon the program. A job-training program, for example, requires office space, equipment and people to teach those enrolled. The jobs program suggested in the chapter imposes a cost of wage payments to those enrolled and administration costs.

An autoworker is laid off during a recession until car sales pick up.

Cyclical

What type of unemployment is best studied within the long-run framework?

Cyclical unemployment, which results from fluctuations in economic activity, is best studied in the short-run framework. Cyclical unemployment goes up and down with the business cycle. It is not, structural unemployment because structural unemployment is caused by the institutional structure of an economy and economic restructuring, and therefore best studied in the long-run framework.

How does the U.S. per capita growth rate since 1940 compare to growth rates in other areas around the world?

From 1940 to 1970 the U.S. economy grew at a rate of about 2.5 percent per year, which was lower than Western Europe and Japan but higher than many other countries. In the following decades until 2000, U.S. growth was higher than most except for India and China, which have experienced considerable growth. Since 2000 the U.S. economy has been slower than many countries, averaging about 1 percent per year in the first decade of the 2000s.

During the past few recessions, government ran expansionary policies, but the duration of unemployment has risen. What does this suggest about the change in structural unemployment over this time period?

The rise in the duration of unemployment suggests that this most recent recession and subsequent slow expansion is different than previous business cycles. It is possible that the cause is structural problems in the economy. That would suggest that structural unemployment in the economy has risen.

Suppose the total labor force is 189 million of a possible 244 million working-age adults. The total number of unemployed is 15 million. What is the standard unemployment rate? (LO24-4)

Unemployment rate = (Number of unemployed/Labor Force) × 100. Unemployment rate = (13/155) × 100 = 8.4%

What are two ways in which long-term economic growth is measured?

measured by increases in total output and increases in output per person.