Chapter 8 Homework

If the steady-state rate of unemployment equals 0.125 and the fraction of unemployed workers who find jobs each month (the rate of job findings) is 0.56, then the fraction of employed workers who lose their jobs each month (the rate of job separations) must be: a. 0.08. b. 0.125. c. 0.22. d. 0.435.

a. 0.08.

Unions contribute to structural unemployment when collective bargaining results in wages: a. above the equilibrium level. b. below the minimum wage. c. below the equilibrium level. d. above the level of unemployment compensation.

a. above the equilibrium level.

All of the following are reasons for frictional unemployment except: a. workers have different preferences and abilities. b. unemployed workers accept the first job offer that they receive. c. the flow of information is imperfect. d. geographic mobility takes time.

b. unemployed workers accept the first job offer that they receive.

A policy that decreases the job separation rate _____ the natural rate of unemployment. a. will increase b. will decrease c. will not change d. could either increase or decrease

b. will decrease

A policy that increases the job-finding rate _____ the natural rate of unemployment. a. will increase b. will decrease c. will not change d. could either increase or decrease

b. will decrease

The natural rate of unemployment in the United States since 1950 has averaged between ______ and ______ percent. a. 0; 1 b. 1; 3 c. 5; 6 d. 10; 15

c. 5; 6

Wage rigidity: a. forces labor demand to equal labor supply. b. is caused by sectoral shifts. c. prevents labor demand and labor supply from reaching the equilibrium level. d. increases the rate of job finding.

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

All of the following are causes of structural unemployment except: a. minimum-wage laws. b. the monopoly power of unions. c. unemployment insurance. d. efficiency wages.

c. unemployment insurance.

Workers unemployed as a result of wage rigidity are: a. actively searching for a job to match their skills. b. not eligible to receive unemployment insurance benefits. c. waiting for a job to become available. d. relocating to another part of the country as a result of sectoral shifts.

c. waiting for a job to become available.

Suppose that over the course of a year 100 people are unemployed for 4 weeks each (the short-term unemployed), while 10 people are unemployed for 52 weeks each (the long-term unemployed). Approximately what percentage of the total weeks of unemployment were attributable to the long-term unemployed? a. 9 percent. b. 10 percent. c. 43.5 percent. d. 56.5 percent.

d. 56.5 percent.

Short-term unemployment is most likely to be ______ unemployment, while long-term unemployment is mostly likely to be _____ unemployment. a. structural; frictional b. structural; the natural rate of c. the natural rate of; frictional d. frictional; structural

d. frictional; structural

Sectoral shifts: a. lead to wage rigidity. b. explain the payment of efficiency wages. c. depend on the level of the minimum wage. d. make frictional employment inevitable.

d. make frictional employment inevitable.

Unemployment insurance increases the amount of frictional unemployment by: Select one: a. making workers more frantic in their search for new jobs. b. inducing workers to accept the first job offer that they receive. c. making employers more reluctant to lay off workers. d. softening the economic hardship of unemployment.

d. softening the economic hardship of unemployment.

Assume that a country experiences a reduction in productivity that shifts the labor demand curve downward and to the left. If the real wage were rigid, this would lead to: a. no change in the real wage and a rise in unemployment. b. no change in the real wage and no change in unemployment. c. no change in the real wage and a fall in unemployment. d. a decrease in the real wage.

a. no change in the real wage and a rise in unemployment.

According to efficiency-wage theories, firms benefit by paying higher-than-equilibrium wages because worker _____ increases. a. productivity b. turnover c. unionization d. shirking

a. productivity

The natural rate of unemployment is: a. the average rate of unemployment around which the economy fluctuates. b. about 10 percent of the labor force. c. a rate that never changes. d. the transition of individuals between employment and unemployment.

a. the average rate of unemployment around which the economy fluctuates.

Spells of unemployment end when the unemployed person finds a job or: a. withdraws from the labor force. b. enters the labor force. c. runs out of unemployment insurance compensation. d. refuses to answer unemployment survey questions.

a. withdraws from the labor force.

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). a. 0 b. 9 c. 10 d. 20

b. 9

Assume that a country experiences a reduction in productivity that shifts the labor demand curve downward and to the left. If the labor market were always in equilibrium, this would lead to: a. a lower real wage and a rise in unemployment. b. a lower real wage and no change in unemployment. c. a lower real wage and less unemployment. d. no change in real wage or in unemployment.

b. a lower real wage and no change in unemployment.

Public policy to increase the job finding rate include _____ and public policy to decrease the job separation rate include _____. a. government employment agencies; higher unemployment insurance benefits b. job training programs; 100 percent experience rated unemployment insurance c. higher minimum wage laws; payment of unemployment benefits for longer periods d. higher efficiency wages; partially experience rated unemployment insurance

b. job training programs; 100 percent experience rated unemployment insurance