Macroeconomics Chapter 9: Inflation rate and Unemployment

How does the U.S. economy create and destroy millions of jobs each year?

1. In the market​ system, new firms are constantly entering and exiting various industries. 2. Some businesses are​ expanding, while others are contracting

Why is the unemployment​ rate, as measured by the Bureau of Labor​ Statistics, an imperfect measure of the extent of joblessness in the​ economy?

A) It fails to account for illegal activities B) it does not account for inaccurate responses to the Current Population Survey. C) Discouraged workers are not considered unemployed. D) Underemployed people are considered employed. *ALL of the above*

The BLS uses the establishment survey LOADING... to collect information on employment in the economy. Indicate one drawback of the establishment survey compared to the current population survey and indicate one advantage.

Advantage- It is based on company payroll and not on unverifiable answers. Drawback- It does not include information about self-employed people. (more on page 275)

According to​ Costco's CEO, Jim​ Sinegal: ​"Paying good wages and keeping your people working for you is good business...Imagine that you have​ 120,000 loyal ambassadors out there who are constantly saying good things about Costco. It has to be a significant advantage for​ you." ​Sources: Alan B. Goldberg and Bill​ Ritter, "Costco CEO Finds​ Pro-Worker Means​ Profitability," ABCnews.com​, Aug.​ 2, 2006; Lori​ Montgomery, "Maverick CEO Joins Push to Increase Minimum​ Wage," Washington Post​, Jan.​ 30, 2007. What is​ Costco's CEO referring​ to?

Efficiency​ wage: A​ higher-than-market wage that a firm pays to increase worker productivity.

Suppose John Q. Worker is currently unemployed. Each​ day, John Q. Worker spends the entire day searching available job openings for an appropriate position given his set of​ skills, abilities, and interests. If someone asks John Q. what he does for​ work, he tells them that he is currently​ "in-between jobs." Which of the following best classifies John​ Q.'s unemployment​ status?

Frictional Unemployment = ​Short-term unemployment that arises from the process of matching workers with jobs.

Which of the following formulas does the Bureau of Labor Statistics use to calculate the unemployment​ rate?

Number of unemployed/Number in labor force×100.

What effect do labor unions LOADING... have on the unemployment​ rate?

Since few​ non-government workers are​ unionized, there is no significant effect on the unemployment rate.

Suppose that Sally J. Society recently lost her job as an underwater welder. In looking for a new​ job, she discovers that the only available jobs are for economists and that there are no openings for underwater welders because the trade is now obsolete. If Sally J. Society decides to return to school to earn an Economics​ degree, what is the best classification of her unemployment​ status?

Structural Unemployment

How do unemployment insurance payments... in the United States and social insurance programs in other countries increase the unemployment​ rate?

They decrease the opportunity cost of job search.

When the economy is at full​ employment,

all remaining unemployment is either frictional or structural. the natural rate of unemployment prevails. the unemployment rate is greater than zero.

When compared to the Great​ Depression, the typical length of unemployment in the modern​ (post-Great Depression-era) U.S. economy is

relatively brief