Macroeconomics: Unemployment & CPI: Early Bird Assignment

(Figure: The Minimum Wage) The binding minimum wage of P3 leads to unemployment of: A. Q3 - Q2 B. Q4 - Q1 C. Q3 - Q1 D. Q4 - Q2

B. Q4 - Q1

Which of the following is a likely response to inflation? A. People tend to make more transactions. B. People choose to carry higher money balances. C. People tend to make fewer transactions. D. People tend to hold on to fewer interest-bearing assets.

A. People tend to make more transactions.

(Figure: The Minimum Wage) What is the quantity of labor supplied at a binding minimum wage of P3? A. Q4 B. Q2 C. Q1 D. Q3

A. Q4

Scenario: Employment in Xenia Xenia has 10,000 people. Of this population, 1,000 residents are below the age of 16 and 2,000 have given up looking for work. Currently, 500 people are unemployed but are actively looking for work; 2,500 work part time, and the remaining number are fully employed. (Scenario: Employment in Xenia) Suppose the number of workers who had given up looking for work in Xenia start looking for work. What happens to the unemployment rate? A. The unemployment rate will increase. B. It is uncertain what will happen to the unemployment rate. C. The unemployment rate is unaffected by this change. D. The unemployment rate will decrease.

A. The unemployment rate will increase.

Internet employment agencies have simplified the job search for the applicants. They have also led to a(n): A. decrease in frictional unemployment. B. increase in cyclical unemployment. C. decrease in structural unemployment. D. increase in frictional unemployment.

A. decrease in frictional unemployment.

A binding minimum wage does all of the following except: A. decrease the quantity of labor supplied. B. increase the quantity of labor supplied. C. decrease the quantity of labor demanded. D. increase unemployment.

A. decrease the quantity of labor supplied.

You have gone to the bank to borrow money for one year. The nominal annual interest rate is 7.5%. The real rate of interest is 4%. Over the course of the year, overall prices increased by 4%. This rate of inflation hurt the _____ because the actual rate of inflation was _____ than the anticipated rate of inflation. A. lender; higher B. borrower; higher C. borrower; lower D. lender; lower

A. lender; higher

Cyclical unemployment: A. rises during a recession. B. is a part of natural unemployment. C. falls during a recession. D. rises during an expansion.

A. rises during a recession.

A binding minimum wage causes structural unemployment. True False

True

Cyclical unemployment is a result of recessions and economic downturns and is not considered a part of the natural rate of unemployment. True False

True

If the rate of unemployment is 10% and the labor force is 130 million, the number of unemployed workers is: A. impossible to determine with the above information. B. 13 million. C. 10 million. D. 10%.

B. 13 million.

Donna was laid off by her employer at the beginning of 2011. She looked for a job for three months but could not find anything suitable. She then decided to volunteer for a soup kitchen and stopped looking for a job. Donna is considered to be: A. unemployed. B. a discouraged worker. C. underemployed. D. a part-time worker.

B. a discouraged worker.

A person who spends time looking for work is: A. counted as out of the labor force. B. engaged in job search. C. counted as employed. D. usually counted as a discouraged worker.

B. engaged in job search.

Which of the following most accurately describes how to calculate the unemployment rate? A. (Unemployed/population) × 100 B. [(Unemployed - employed)/labor force] × 100 C. (Unemployed/labor force) × 100 D. (Unemployed/employed) × 100

C. (Unemployed/labor force) × 100

If 99 million people are working and 1 million are unemployed but actively seeking work, then the unemployment rate is: A. 100%. B. 10%. C. 1%. D. 5%.

C. 1%.

If a country has a working-age population of 200 million, 120 million people with jobs, and 30 million people unemployed and seeking employment, then its unemployment rate is: A. 5%. B. 15%. C. 20%. D. 7.5%.

C. 20%.

The natural rate of unemployment is: A. equal to the sum of frictional and cyclical unemployment. B. cyclical unemployment less frictional unemployment. C. equal to the sum of frictional and structural unemployment. D. the rate of unemployment during recessions.

C. equal to the sum of frictional and structural unemployment.

For most of U.S. modern economic history, when the unemployment rate is _____, real GDP is _____. A. rising; unchanged B. falling; falling C. falling; rising D. rising; rising

C. falling; rising

When the unemployment rate is very low, most of the unemployment tends to be: A. seasonal. B. structural. C. frictional. D. cyclical.

C. frictional.

Increases in unemployment compensation: A. decrease the number of jobs available. B. increase the number of jobs available. C. increase unemployment. D. reduce unemployment.

C. increase unemployment.

If money income remains the same while the average price level doubles: A. interest rates will fall. B. purchasing power will increase. C. real income will fall. D. nominal income will fall.

C. real income will fall.

Unemployment is at its natural level if there is no: A. unemployment. B. frictional unemployment. C. structural employment. D. cyclical unemployment.

D. cyclical unemployment.

The labor force is considered to be: A. the population of the nation. B. those not frictionally unemployed plus all others employed. C. everyone who is employed. D. everyone who is employed plus everyone who is unemployed.

D. everyone who is employed plus everyone who is unemployed.

Structural unemployment can be caused by all of the following except: A. minimum wages. B. efficiency wages. C. labor unions. D. fluctuations in the business cycle.

D. fluctuations in the business cycle.

Structural unemployment consists of people who are unemployed because of: A. an excess in the quantity of labor demanded over the quantity of labor supplied. B. the time it takes for employers and workers to find each other. C. temporary changes in jobs. D. more people seeking jobs in a labor market than there are jobs available at the current wage rate.

D. more people seeking jobs in a labor market than there are jobs available at the current wage rate.

The rate of unemployment is found by dividing the: A. number of people looking for work by the population. B. labor force by the number of people looking for work. C. unemployed and discouraged workers by the labor force. D. number of people looking for work divided by the number of people looking for work plus the number of people who are employed.

D. number of people looking for work divided by the number of people looking for work plus the number of people who are employed.

Last month Brent lost his job at the auto parts factory because his factory, like many others, relocated to Asia. Brent has been looking for similar factory jobs in his town but has found no openings. Brent is best classified as: A. a discouraged worker. B. out of the labor force. C. frictionally unemployed. D. structurally unemployed.

D. structurally unemployed.

If the government increases the length and amount of unemployment benefits, the unemployment rate will fall. True False

False