Macroeconomics-Chapter 28

What is frictional unemployment?

The unemployment that results from the process of matching workers and jobs

Describe a discouraged worker?

These individuals may have tried to find a job and may have given up after an unsuccessful search.

What is Structural Unemployment?

This occurs when the quantity of labor supplied exceeds the quantity demanded.

Insiders

Those employed in union jobs

Outsiders

Those not employed in union jobs

Which of the following is an example of a reason why firms might pay efficiency wages? A.At equilibrium wages, workers often quit to find better jobs. B.At equilibrium wages, workers sleep when the boss is not looking because workers are not deeply concerned about being fired. C.At equilibrium wages, only minimally qualified workers apply for the job. D.At equilibrium wages, workers cannot afford a healthy diet so they fall asleep at work due to a lack of energy. E.All of the above are true.

.All of the above are true.

Due to the existence of "discouraged workers," the official unemployment rate may overstate true unemployment.

False ,the official unemployment rate may understate true unemployment.

sectoral shifts

changes in the composition of demand across industries or regions of the country

If, for any reason, the wage is held above the competitive equilibrium wage, A.unions will likely strike, and the wage will fall to equilibrium. B.the quality of workers in the applicant pool will tend to fall. C.the quantity of labor supplied will exceed the quantity of labor demanded, and there will be unemployment. D.the quantity of labor demanded will exceed the quantity of labor supplied, and there will be a labor shortage.

the quantity of labor supplied will exceed the quantity of labor demanded, and there will be unemployment.

What does the BLS define the labor force as?

the sum of the employed and the unemployed: = Number of Employed + Number of Unemployed

A union is a labor cartel.

True

What is cylical unemployment?

the deviation of unemployment from its natural rate

Some frictional unemployment is inevitable because A.efficiency wages may hold the wage above the equilibrium wage. B.of minimum-wage laws. C.there are changes in the demand for labor among different firms. D.of unions. E.of all of the above.

.there are changes in the demand for labor among different firms.

What is the age to be considered in the workforce?

16 years old

What is the natural unemployment percentage?

4.9 percent

strike

An organized withdrawal of labor from the firm

Who measures unemployment?

Bureau of Labor Statistics

What is the process by which unions and firms agree on the terms of employment?

Collective Bargaining

What survey does the BLS produce on 60,000 households?

Current Population Survey

What is the theory that for firms operate more efficiently wages must be kept above the equilibrium level?

Efficiency Wages

This category includes those who worked as paid employees, worked in their own business, or worked as unpaid workers in a family member's business. Both full-time and part-time workers are counted. This category also includes those who were not working but who had jobs from which they were temporarily absent because of, for example, vacation, illness, or bad weather.

Employed

Name the three categories of the labor force.

Employed, Unemployed, Not in the Labor Force

A minimum wage is likely to have a greater impact on the market for skilled workers than on the market for unskilled workers.

False ,a minimum wage has a greater impact on low-wage workers.

An efficiency wage is like a minimum wage in that firms are required by legislation to pay it.

False ,efficiency wages are paid voluntarily by firms.

Paying efficiency wages tends to increase worker turnover because workers can get continually higher wages if they "job hop."

False ,efficiency wages reduce turnover.

If the unemployment rate falls, we can be certain that more workers have jobs.

False ,the unemployment rate falls when unemployed workers leave the labor force.

If wages were always at the competitive equilibrium, there would be absolutely no unemployment.

False ,there would still be frictional unemployment.

The unemployment rate is about the same for the various demographic groups: men, women, black, white, young, old.

False ,unemployment differs across demographic groups.

The presence of unemployment insurance tends to decrease the unemployment rate because recipients of unemployment benefits are not counted in the labor force.

False ,unemployment insurance increases the unemployment rate because it increases frictional unemployment.

Which type of unemployment will occur even if the wage is at the competitive equilibrium? Why?

Frictional unemployment because job matching takes time even when the wage is at the competitive equilibrium. Also, continuous sectoral shifts and new entrants into the job market make some frictional unemployment inevitable.

How might the government help reduce frictional unemployment?

How might the government help reduce frictional unemployment?

Where would a labor union be more likely to increase efficiency rather than reduce it: a small remote town with one large employer or a major city with many employers? Why?

In a small "company" town where a single company has market power that may depress the wage below the competitive equilibrium. This may need to be offset by organized labor.

Name two ways that a union increases the disparity in wages between members and nonmembers.

It raises the wage above the competitive equilibrium in the unionized sector. Some of those unemployed in the unionized sector move to the nonunionized sector, increasing the supply of labor and lowering the wage in the nonunion sector.

Explain the statement, "Most spells of unemployment are short, and most unemployment observed at any given time is long term."

Many people are unemployed for short periods. A few people are unemployed for very long periods.

Does the minimum wage cause much unemployment in the market for accountants? Why or why not?

No because the competitive equilibrium wage for accountants exceeds the minimum wage, and hence, the minimum wage is not a binding constraint for accountants.

This category includes those who fit neither of the first two categories, such as full-time students, homemakers, and retirees.

Not in the labor force.

Which of the following statements about efficiency wage theory is true? A.Firms do not have a choice about whether they pay efficiency wages or not because these wages are determined by law. B.Paying the lowest possible wage is always the most efficient (profitable). C.Paying above the competitive equilibrium wage tends to cause workers to shirk their responsibilities. DPaying above the competitive equilibrium wage may improve worker health, lower worker turnover, improve worker quality, and increase worker effort.

Paying above the competitive equilibrium wage may improve worker health, lower worker turnover, improve worker quality, and increase worker effort.

Which of the following statements is true? A.Prime-age men and women tend to have similar unemployment rates. B.The labor-force participation rate of men is rising. C.Blacks have a lower unemployment rate than whites. D.Most spells of unemployment are long term, but most unemployment observed at any given time is short term. E.All of the above are true.

Prime-age men and women tend to have similar unemployment rates.

Name two reasons why the unemployment rate is an imperfect measure of joblessness.

Some people claim to be looking for work just to collect unemployment benefits, or they are being paid "under the table." Others are discouraged workers and have stopped looking for work due to an unsuccessful search.

Which of the following individuals is most likely to be unemployed for the long term: a buggy whip maker who loses his job when automobiles become popular or a waitress who is laid off when a new cafe opens in town? Why?

The buggy whip maker. He will have to retrain because the contraction of the buggy whip business is permanent, while the waitress may just have to relocate, possibly just down the street.

What is the natural rate of unemployment?

The normal rate of unemployment around which the unemployment rate fluctuates

Advocates of unions argue that unions may increase efficiency in some circumstances because they decrease the cost of bargaining between labor and management.

True

Firms may voluntarily pay wages above the level that balances the supply and demand for workers because the higher wage improves the average quality of workers that apply for employment.

True

In post-World War II United States, the labor-force participation rate has been rising for women and has been falling for men.

True

The natural rate of unemployment is the amount of unemployment that won't go away on its own, even in the long run.

True

The presence of a union tends to raise the wage for insiders and lower the wage for outsiders.

True

Whenever the wage rises above the competitive equilibrium, regardless of the source, the result is additional unemployment.

True

Which alternative measure of unemployment attempts to include the impact of discouraged workers in the unemployment statistics? Explain. Is it higher or lower than the official unemployment rate? Explain.

U4. It is total unemployed plus discouraged workers as a percent of the civilian labor force plus discouraged workers. It is a little higher than the official unemployment rate because it includes some nonworking people who have given up looking for work and have fallen out of the labor force.

This category includes those who were not employed, were available for work, and had tried to find employment during the previous four weeks. It also includes those waiting to be recalled to a job from which they had been laid off.

Unemployed

How does unemployment insurance increase frictional unemployment?

Unemployed workers devote less effort to their job search, turn down unattractive job offers, and are less concerned with job security.

What is a government program that increases frictional unemployment?

Unemployment insurance

What is a union?

a worker association that bargains with employers over wages, benefits, and working conditions.

A minimum-wage law tends to A.create more unemployment in high-skill job markets than in low-skill job markets. B.create more unemployment in low-skill job markets than in high-skill job markets. C.have no impact on unemployment as long as it is set above the competitive equilibrium wage. D.help all teenagers because they receive a higher wage than they would otherwise.

create more unemployment in low-skill job markets than in high-skill job markets.

What data does BLS produce on unemployment?

including types of employment, length of the average workweek, and the duration of unemployment.

Sectoral shifts tend to raise which type of unemployment? A.frictional unemployment B.structural unemployment C.unemployment due to unions D.unemployment due to efficiency wages

frictional unemployment

Which of the following types of unemployment will exist even if the wage is at the competitive equilibrium? unemployment due to minimum-wage laws unemployment due to unions unemployment due to efficiency wages frictional unemployment

frictional unemployment

Which of the following is not a characteristic of minimum-wage workers? They tend to be A.young. B.less educated. C.full time. D.in the food service and drinking place industry.

full time.

Unions tend to increase the disparity in pay between insiders and outsiders by creasing the wage in the unionized sector, which may create an increase in the supply of workers in the nonunionized sector. increasing the wage in the unionized sector, which may create a decrease in the supply of workers in the nonunionized sector. decreasing the demand for workers in the unionized sector. increasing the demand for workers in the unionized sector.

increasing the wage in the unionized sector, which may create an increase in the supply of workers in the nonunionized sector.

Right-to-work laws

legislation that makes it illegal to require union membership for employment

According to the Bureau of Labor Statistics, a husband who chooses to stay home and take care of the household is A.unemployed. B.employed. C.not in the labor force. D.a discouraged worker.

not in the labor force

An accountant with a CPA designation who has been unable to find work for so long that she has stopped looking for work is considered to be A.employed. B.unemployed. C.not in the labor force. D.not in the adult population.

not in the labor force.

Unions might increase efficiency in the case where they A.raise the wage for insiders above the competitive equilibrium. B.offset the market power of a large firm in a "company town." C.lower the wage of local outsiders. D.threaten a strike but don't actually follow through, so there are no lost hours of work.

offset the market power of a large firm in a "company town."

Which of the following government policies would fail to lower the unemployment rate? A.reduce unemployment benefits B.establish employment agencies C.establish worker training programs D.raise the minimum wage E.establish right-to-work laws

raise the minimum wage

Which one of the following types of unemployment results from the wage being held above the competitive equilibrium wage? A.structural unemployment B.cyclical unemployment C.frictional unemployment D.sectoral unemployment E.None of the above is correct.

structural unemployment

The amount of unemployment that the economy normally experiences is known as: A.efficiency wage unemployment. B.frictional unemployment. C.cyclical unemployment. D.the natural rate of unemployment.

the natural rate of unemployment.

If unemployment insurance were so generous that it paid laid-off workers 95 percent of their regular salary, the official unemployment rate would probably understate true unemployment. the official unemployment rate would probably overstate true unemployment. there would be no impact on the official unemployment rate. frictional unemployment would fall. none of the above is true.

the official unemployment rate would probably overstate true unemployment.

What does the BLS define the unemployment rate as?

the percentage of the labor force that is unemployed: = Number of Unemployed / Labour Force x 100

What does the BLS define the labor-force participation rate as?

the percentage of the total adult population of the United States that is in the labor force: = Labor Force/Adult Population x 100

What is a job search?

the process of matching workers with appropriate jobs.