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1 Page 1 of An underemployed worker who is looking for a full-time job is A discouraged worker. Phantom unemployed. Structurally unemployed. None of the choices are correct. An underemployed worker is employed. Learning Objective: The major types of unemployment. 2. In the early weeks of a recession, what type of unemployment gets larger? Frictional. Structural. Cyclical. Seasonal. As demand falls off, the economy enters the downward portion of the business cycle that is characterized by cyclical unemployment. Learning Objective: The major types of unemployment. 3. When people over 16 years old start looking for jobs, the Unemployment rate increases and the labor force increases. Unemployment rate decreases and the labor force decreases. Unemployment rate increases and the labor force decreases. Unemployment rate decreases and the labor force increases. When people start looking for work, the "looking for work" portions of both the numerator and denominator get larger. Example: 3/(3 + 6) = 33.3%; 4/(4 + 6) = 40 %.

2 Page 2 of When unemployed people stop looking for jobs, the Unemployment rate increases and the labor force increases. Unemployment rate decreases and the labor force decreases. Unemployment rate increases and the labor force decreases. Unemployment rate decreases and the labor force increases. When people stop looking for work, the "looking for work" portions of both the numerator and denominator get smaller. Example: 4/(4 + 6) = 40%; 3/(3 + 6) = 33.3%. 5. An unemployed worker who wants a job but has given up in the search for a new job is referred to as a/an Unemployed worker. Phantom unemployed worker. Discouraged worker. Underemployed worker. The presence of discouraged workers distorts our official unemployment figures. 6. Suppose the working-age population of Country A is 200 million, the number employed is 130 million, and the number unemployed is 10 million. What is the labor force participation rate? 60 percent. 70 percent. 65 percent. 75 percent. The labor force participation rate is the labor force divided by the working-age population expressed as a percentage: ( )/200. Difficulty: 3 Hard

3 Page 3 of The natural rate of unemployment includes Seasonal and cyclical unemployment only. Cyclical and frictional unemployment only. Structural and seasonal unemployment only. Frictional and structural unemployment only. The natural rate of unemployment does not include seasonal or cyclical unemployment. Difficulty: 1 Easy Learning Objective: The meaning of full employment. 8. Why has structural unemployment in the United States increased over the last 20 years? Rapid technology changes have eliminated the needs for certain skill sets. Companies are increasingly outsourcing certain task to cheaper foreign markets. Increased trade with other countries has shut down U.S. factories competing with import industries. All of the choices are correct. Structural unemployment has increased due to rapid technology changes and increased trade and outsourcing. Learning Objective: The major types of unemployment. 9. Which of the following government programs would be most appropriate to counteract cyclical unemployment? Increased job placement services. Greater government expenditures to increase GDP. Year-round school. More job training programs. When private sector spending falls, GDP will fall unless government spending increases to offset the fall in private sector spending. Learning Objective: The major types of unemployment.

4 Page 4 of Which of the following government policies or programs would be most appropriate to offset cyclical unemployment? Those that stimulate more demand. More job training. Additional job placement services. Additional health services to counter the effects of unemployment. A government stimulus that creates more demand will blunt the effect of diminished private sector demand. Learning Objective: The major types of unemployment. 11. A U.S. worker who loses his or her job in an import industry because product demand decreases would be classified as, ceteris paribus, Frictionally unemployed. Cyclically unemployed. Seasonally unemployed. Structurally unemployed. Structural unemployment arises because (1) the skill set of the worker does not meet the needs of the employer or (2) the job has been moved to a location where the worker can no longer go, such as through outsourcing. Learning Objective: The major types of unemployment. 12. A 30-year-old stay-at-home son tells his parent he is looking for work but cannot find a job. When the parent finds the son a job, he refuses to take it. The 30-year-old can best be classified as A discouraged worker. Phantom unemployed. Structurally unemployed. Underemployed. When one is not actively seeking work and not too excited about finding it, one may be considered phantom unemployed. Difficulty: 3 Hard Learning Objective: The major types of unemployment.

5 Page 5 of Suppose a student graduates from college with a civil engineering degree and is now employed to grade papers, answer the phone, and make copies tasks that are below the graduate's capabilities. The graduate can best be classified as A discouraged worker. Structurally unemployed. Phantom unemployed. Underemployed. The official unemployment figures are distorted by underemployed workers and tend to paint a better picture than is present in reality. 14. Suppose there are 6 million unemployed workers actively seeking a job. After a period of time, 1,500,000 of these workers become discouraged and no longer look for employment. If everything else remains constant, the unemployment rate will Decrease. Increase. Remain unchanged until the unemployed find a job. Increase initially but decrease when the phantom unemployed receive unemployment benefits. The official unemployment rate can mask actual unemployment.

6 Page 6 of (Assume the figures above represent the working-age population). If discouraged workers are included in the labor force, what was the unemployment rate for 2000? rev: 08_09_ percent. 3.8 percent. 4.3 percent percent. By including discouraged workers, this new unemployment figure may give a better estimate of the actual unemployment rate: (3 + 10)/( ).

7 Page 7 of (Assume the figures above represent the working-age population). If discouraged workers are included in the labor force, what was the unemployment rate for 1999? rev: 08_09_ percent. 9.7 percent percent. 2.8 percent. By including discouraged workers, this new unemployment figure may give a better estimate of the actual unemployment rate: (2 + 5)/( ). Difficulty: 3 Hard

8 Page 8 of (Assume the figures above represent the working-age population). What was the labor force participation rate in Nationland in 2000? rev: 08_09_ percent percent percent percent. The labor force participation rate is simply the labor force divided by the population: ( )/110.

9 Page 9 of (Assume the figures above represent the working-age population). What was the unemployment rate in Nationland in 1999? rev: 08_09_ percent. 7.1 percent. 5.0 percent percent. The unemployment rate is simply the number of people who are unemployed divided by the labor force: 5/(65 + 5). 19. All of the following are true when the economy is growing except Duration of unemployment falls. Costs associated with unemployment fall. Unemployment rate falls. Underemployment rises. Typically unemployment figures improve during economic expansions.

10 Page 10 of (Assume the figures above represent the working-age population). What is the labor force participation rate in Year 1 in Table 6.3? rev: 08_09_ percent. 3.6 percent percent percent. One can find the labor force participation rate by dividing the labor force by the population: (110/200) * 100.

11 Page 11 of (Assume the figures above represent the working-age population). What is the unemployment rate in Year 5 in Table 6.3? rev: 08_09_ percent. 6.9 percent. 4.0 percent percent. The number of unemployed people divided by the number of people in the labor force equals the unemployment rate: {( )/145} * 100.

12 Page 12 of (Assume the figures above represent the working-age population). What is the number of unemployed in Year 1 in Table 6.3? rev: 08_09_ million. 94 million. 106 million. 4 million. The number of unemployed people can be found by subtracting the number employed from the number in the labor force: ( ).

13 Page 13 of (Assume the figures above represent the working-age population). Based on Table 6.2, what was the labor force participation rate in 2000? rev: 08_09_ percent percent percent percent. The labor force participation rate is equal to the labor force divided by the population: {( )/110} * Suppose a country has 1 billion people. 75 percent of its citizens are in the labor force, with 90 million unemployed. Full employment occurs at 2 percent. Based on this information, what is the unemployment rate? 12.0 percent percent. 9.0 percent. 8.3 percent. The unemployment rate can be found by dividing the number of people who are unemployed by the number of people in the labor force: (90 million/750 million) * 100.

14 Page 14 of Suppose a country has 10 million people. Three-fourths of those individuals are in the labor force, with 500,000 unemployed. Full employment occurs at 5 percent. Based on this information, what is the unemployment rate? 6.67 percent. 75 percent. 7.5 percent. 5 percent. Taking the number of unemployed people and dividing it by the number of people in the labor force will give you the unemployment rate. 26. Suppose that in a population of 50 million persons, 40 million are in the labor force, 36 million are employed, 2 million are classified as unable to work, and 1 million are classified as unwilling to work. The unemployment rate is 10.0 percent percent. 8.0 percent percent. The number of unemployed people divided by the number of people in the labor force yields the unemployment rate. Difficulty: 3 Hard 27. The most widely used measure of the unemployment rate is found by the U.S. Department of Labor in surveys of businesses to determine the number of employees as a percentage of the total labor force. U.S. Census Bureau in monthly surveys that examine whether people are working or are willing to work. U.S. Census Bureau in its census of the population every 10 years. Council of Economic Advisers, which summarizes its nationwide surveys in its yearly report to the president. The Census Bureau is responsible for sampling the population of the United States to find useful information such as unemployment figures. Difficulty: 1 Easy

15 Page 15 of To be officially counted as unemployed, one must be Either not working or working only part-time. Not employed at a full-time job. Actively seeking employment and currently not working. None of the choices are correct. Being without a job is insufficient to be considered as unemployed; one must also be actively seeking a job. Difficulty: 3 Hard 29. According to Okun's Law, if unemployment rises by 5 percent while imports and exports increase at roughly the same rate, the economy will lose output equal to 1 percent. 2 percent. 5 percent. 10 percent. For every 1 percent increase in unemployment, Okun's Law forecasts a 2 percent decrease in real GDP. Difficulty: 3 Hard 30. When the economy is below full employment, it is producing On the production possibilities curve. Beyond the production possibilities curve. Inside the production possibilities curve. None of the choices are correct. Unemployed resources above the natural rate of unemployment result in society producing at a point below the production possibilities curve. Difficulty: 1 Easy

16 Page 16 of From 1950 until 2000, the labor force participation rate has Increased for men and increased for women. Decreased for men and decreased for women. Increased for men and decreased for women. Decreased for men and increased for women. The labor force participation rate for men has decreased due to men living long enough to retire. The labor force participation rate for women has increased because the opportunity cost of remaining an unpaid homemaker as opposed to a labor force participant has significantly increased. Difficulty: 1 Easy