Chapter 29 macro economics Unemployment
Which of the following are reasons why teenagers have a much higher unemployment rate than adults?
"Fired" more frequently Have less geographic mobility Have lower skill levels Quit more frequently
In the trough of a recession, output and employment
"bottom out" at their lowest levels
According to Okun's law, if the unemployment rate in 2009 was 9.6, the natural rate of unemployment was 7.4, and the potential GDP was $8,500 billion, what was the loss of output associated with the above-natural unemployment rate?
$374 billion
Which of the following is the formula for calculating the unemployment rate?
(unemployed/labor force) x 100%
Which statements about frictional and structural unemployment are true?
-Frictionally unemployed workers live in areas where jobs exist, while structurally unemployed workers do not have appropriate jobs available to them. -Frictionally unemployed workers have marketable skills, while structurally unemployed workers do not.
Which of the following describe why unemployment rates are higher for African Americans and Hispanics than for whites?
-Lower rates of educational attainment -Greater concentration in lower-skilled occupations
What is true about business cycles?
-They vary in duration and intensity. -"Ups" are followed by "downs." -They are made up of alternating rises and declines.
In the short run, when prices are sticky, an unexpected decrease in total spending will cause
-firms to cut back on production -unemployment to rise -GDP to decline -firms to sell fewer units of output
Suppose that in a particular year the natural rate of unemployment is 5 percent and the actual rate of unemployment is 8 percent. Using Okun's law, what is the size of the GDP gap in percentage point terms?
6 percent
When prices are sticky in the short run, which of the following is a result of an unexpected increase in total spending?
An increase in income
How does the U.S. Bureau of Labor Statistics determine the nation's unemployment rate?
By conducting a monthly, nationwide random survey of 60,000 households
Which demographic categories are commonly used by economists when breaking down unemployment rates?
Duration Education Gender
Why does the business cycle affect output and employment in capital and durable goods industries more severely than in industries producing non-durable goods?
During a recession, business investment in new capital goods and consumer spending on new durable goods can be postponed.
Which of the following is a consequence of unexpected lower total spending in the short-run when prices are sticky?
Firms sell fewer units of output
What does Okun's law indicate?
For every 1% by which the actual unemployment rate exceeds the natural rate there will be a negative GDP gap of 2%.
Remy worked as a sales associate at a large retailer through the holiday season, but that position has since ended. As a result, Remy is without work while he looks for a new job. What term would economists use to refer to Remy's situation?
Frictional unemployment
The difference between actual and potential GDP is called a Blank______ gap.
GDP
What are the results of unexpected higher total spending in the short run when prices are sticky?
GDP rises Employment rises Output rises
Which of the following are possible sources of the demand and supply shocks that can cause business cycles?
Irregular innovation Monetary factors Financial instability
Which of the following are characteristics of lower-skilled workers?
Longer spells of structural unemployment Less likely to be self-employed
Which of the following are consequences of the widespread joblessness of cyclical unemployment?
Lower morale Increased poverty Greater ethnic tensions
Which of the following are categories by which unemployment rates are broken down?
Occupation Race and ethnicity Age
Which of the following could be considered a cost of cyclical unemployment?
Political upheaval Higher crime, suicide, and divorce rates Severe psychological costs to the job loser
______ is a major factor preventing the economy from rapidly adjusting to shocks.
Price stickiness
Why are household purchases are affected by the business cycle and the negative effects of a recession?
Purchases of durable goods can be postponed.
What was the state of the world economy before the start of the COVID-19 pandemic?
Robust growth
Which of the following is a major factor in preventing the economy from rapidly adjusting to shocks?
Sticky prices
Which type of unemployment occurs as a direct result of a mismatch between skills and jobs?
Structural
What is the unemployment rate?
The percentage of the labor force that is unemployed
Which of the following is a reason teenagers have a higher unemployment rate than adults?
They have lower skill levels.
What are the four phases of the business cycle?
Trough Peak Recession Expansion
Which of the following are normally very similar between men and women?
Unemployment rates
What are common characteristics of less-educated workers that contribute to their having higher unemployment rates than workers with more education?
Working lower-skilled jobs Working jobs that are vulnerable to cyclical layoff Having more time between jobs
Okun's law suggests that for every percentage point by which the ___________ unemployment rate exceeds the _______ rate, a negative GDP gap of about 2% occurs.
actual natural
What is the formula for a GDP gap?
actual GDP minus potential GDP
Business cycles are
alternating increases and decreases in economic activity
Frictional unemployment is defined as a type of unemployment that is caused by workers who
are unemployed as they actively search for a new job.
A key issue in macroeconomics is why the economy sees
business cycle fluctuations rather than slow, smooth growth
Firms and industries producing capital goods are affected most by the business cycle and the negative effects of a recession because purchases of capital goods
can be postponed
Services and nondurable consumer goods are somewhat insulated from the severe effects of a recession because purchases of services and nondurable goods
cannot be postponed
In 2020, an unusual type of recession was triggered by the __________ pandemic.
covid 19
Economists say that the economy is at "full employment" when the Blank______ unemployment rate is zero.
cyclical
Unemployment that results from the decline in total spending that occurs during the recession phase of the business cycle is called Blank______ unemployment.
cyclical
A worker that is unemployed because of an insufficient demand for goods and services is an example of
cyclical unemployment
What term describes a worker who, after unsuccessfully seeking employment for some time, becomes frustrated and stops actively seeking work?
discouraged
Economic theories are founded on the idea that economic fluctuations are driven by
economic shocks
Those who are working are defined as___________ (one word) and those who are not working but actively seeking work are defined as ___________
employed unemployed
The labor force is the sum of the Blank______ and Blank______.
employed; unemployed
When prices are sticky in the short run, the economy is forced to respond to shocks in the economy with changes in
employment output
An economy is "fully employed" when the unemployment rate
equals the structural and frictional unemployment rate
What is the long-run trend of the U.S. economy?
expansion and growth
True or False: When an economy experiences negative shocks, in the short run, the economy responds primarily through changes in prices.
false
True or false: Recent recessions have been more severe in intensity, but not duration, than the Great Depression of the 1930s.
false
True or false: The unemployment rate for African Americans and Hispanics is lower than that for whites.
false
Full employment is something less than 100 percent employment of the labor force because economists say that the economy is "fully employed" when it is experiencing only
frictional and structural unemployment
Ramel quit his current job and has taken a new job for higher pay. The new job starts in two weeks. During the two weeks between jobs, Ramel is Blank______ unemployed.
frictionally
Workers that are __________ unemployed live in areas where jobs exist, and they have marketable skills.
frictionally
Which term describes workers that are unemployed because they are "between jobs"?
frictionally unemployed
The economy attains Blank______ when the unemployment rate equals the natural rate of unemployment.
full employment
The difference between actual and potential GDP is called a GDP
gap
The long-run trend of the U.S. economy is expansion and economic
growth
On average, unemployment rates among less-educated workers are ________ than workers with more education
higher
Frictional unemployment means that many workers are voluntarily between jobs as they are moving to higher-paying, more productive positions. Which of the following are desirable results of this movement?
higher income for the workers increase in GDP better allocation of labor resources
What happens during an expansion period?
income rises output rises
Frictional unemployment is
inevitable and, in part, desirable
Which of the following are the most likely sources of shocks that can cause business cycles?
irregular innovation monetary factors productivity changes unexpected political events
Why the economy sees business cycle fluctuations rather than slow, smooth growth is a central issue of
macroeconomics
The intensity and duration of the decline in GDP during the Great Depression was Blank______ the more recent U.S. recessions.
more severe than
The basic economic cost of unemployment is forgone
output
What happens during periods of recession?
output and employment fall
The phase of the business cycle at which the economy is at or near full employment is known as a(n)
peak
What is the phase of the business cycle when the economy is near or at full employment and the level of real output is at or near capacity?
peak
A GDP gap equals actual GDP minus _______ GDP
potential
How does the U.S. Bureau of Labor Statistics determine who is employed and unemployed?
random survey of households
An expansion usually follows immediately after a Blank______ in the business cycle.
recession
The phase of the business cycle that describes a decline in total output, income, and employment is called a(n)
recession
The four phases of the business cycle can be illustrated by a series of alternating
rising and declining curves
Unexpected events that drive economic cycles and fluctuations are called economic
shock
An auto worker in Michigan who loses his job because the company relocated the plant to another country is an example of Blank______ unemployment.
structural
The labor force is the
sum of the employed and unemployed
Which best describes the natural rate of unemployment?
sum of the frictional unemployment and structural unemployment rates
The unemployment rate equals the percentage of
the labor force that is unemployed
The number of persons unemployed for long periods as a percentage of the labor force is much lower than
the overall unemployment rate
It is widely accepted that the immediate cause of large cyclical changes in output and employment levels is a change in the level of
total spending
The economy moves up and down rather than staying on a smooth growth trend line due to unexpected changes in
total spending
A Blank______ of a recession is when output and employment "bottom out" at their lowest levels.
trough
True or false: Full employment is something less than 100 percent employment of the labor force.
true
What is a discouraged worker?
unemployed worker who no longer seeks work actively
The portion of the labor force that is not working but is willing and able to work and actively seeking work is defined as Blank______, and the portion of the labor force that is working part-time or full-time is defined as
unemployed; employed
The unemployment rate is calculated by dividing the number of Blank______ by the Blank______ times 100.
unemployed; labor force
Forgone output is a basic economic cost of
unemployment
Workers in lower-skilled occupations have higher Blank______ rates than workers in higher-skilled occupations.
unemployment
