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1 Hmwk Which of the following people are counted as unemployed? A. a person who wants to work but stopped searching six months ago B. a person out of work but actively searching for work C. a person in prison D. a person who works part time but who wants full-time work 2. According to the figure below, what percent of all Americans are employed ( employment-population ratio )? 1 of 15 11/28/11 12:41 PM

2 2 of 15 11/28/11 12:41 PM

3 A percent B percent C million D percent 3. According to the figure below, what percent of the labor force is employed? 3 of 15 11/28/11 12:41 PM

4 4 of 15 11/28/11 12:41 PM

5 Answer: D A percent B million C percent D. None of these answers. 4. How would the unemployment rate change if we counted discouraged workers as unemployed? Answer: D A. the unemployment rate would decrease B. the unemployment rate would double C. the unemployment rate would not change D. the unemployment rate would increase by about 0.3 percent 5. Decide whether the following is considered to be frictional unemployment, structural unemployment, cyclical unemployment, or none of these: The economy gets worse, so General Motors shuts down a factory for four months, laying off workers. A. frictional B. structural C. cyclical D. None of these answers. 6. Decide whether the following is considered to be frictional unemployment, structural unemployment, cyclical unemployment, or none of these: General Motors lays off 5,000 workers and replaces them with robots. The workers start looking for jobs outside the auto industry. A. frictional B. structural C. cyclical D. None of these answers. 7. Decide whether the following is considered to be frictional unemployment, structural unemployment, cyclical unemployment, or none of these: About 10 workers per month at a General Motors plant quit their jobs because they want to live in another town. They start searching for work in the new town. A. frictional B. structural C. cyclical D. None of these answers. 8. How does a binding minimum wage affect the labor market? 5 of 15 11/28/11 12:41 PM

6 A. it creates a shortage of labor B. it creates a surplus of labor C. quantity supplied of labor will be equal to the quantity demanded of labor D. the equilibrium wage will be above the binding minimum wage 9. Let's try to understand the relationship between recessions and the unemployment rate. According to the figure below, when does the unemployment rate tend to reach its peak? Note: the shaded areas are recessions. A. before the recession begins B. during the recession C. after the recession D. in between recessions 10. According to the figure below, during which decade was the natural unemployment rate the highest? 6 of 15 11/28/11 12:41 PM

7 A. during the 1950s B. during the 1970s C. during the 1980s D. during the 1990s 11. According to the figure below, how big is the difference in labor force participation rates between countries with the highest implicit tax rate on older men compared to countries with the lowest implicit tax rate? 7 of 15 11/28/11 12:41 PM

8 ' Answer: D A. about 10 percent B. about 20 percent C. about 30 percent D. about 40 percent 12. Which of the following would reduce the rate of structural unemployment? A. more unions and a higher minimum wage B. more job retraining and job-search assistance C. increased unemployment benefits and stronger employment protections laws D. more government intervention in the labor market and more rigid labor markets 13. How would the following event affect the unemployment rate: people without jobs and looking for work give up and stop looking? A. The unemployment rate would rise since the number of discouraged workers has increased. B. The unemployment rate would rise since the number of discouraged workers has decreased. C. The unemployment rate would fall since the number of discouraged workers has increased. D. The unemployment rate would fall since the number of discouraged workers has decreased. 8 of 15 11/28/11 12:41 PM

9 14. How would the following event affect the unemployment rate: people without jobs and not looking for work become encouraged and decide to start looking for work? A. The unemployment rate would rise since the number of discouraged workers has increased. B. The unemployment rate would rise since the number of discouraged workers has decreased. C. The unemployment rate would fall since the number of discouraged workers has increased. D. The unemployment rate would fall since the number of discouraged workers has decreased. 15. Suppose that 5 million jobs are destroyed every month and about 5.25 million jobs are created. How many total jobs are destroyed for every net job created? A. 20 jobs are destroyed for every net job created. B jobs are destroyed for every net job created. C. 1 job is destroyed for every net job created. D. 1.5 jobs are destroyed for every net job created. 16. According to the table below, if you have to pick a country to lose your job in, and you know you're going to be out of work for one year, which country offers the highest one-year average replacement rate? A. France B. Germany C. Spain 9 of 15 11/28/11 12:41 PM

10 D. United States 17. Let's see how GDP per person can be affected by changes in the fraction of citizens who work. This fraction is better known as the employment-population ratio. Let's assume that every employed worker produces $50,000 worth of output. If the employment-population ratio (Worker/Person) rises from 50 percent to 55 percent, what happens to GDP per person? Note that GDP/person = (GDP/Worker) X (Employment population ratio) A. The GDP per person falls by 10 percent. B. The GDP per person rises by 10 percent. C. The GDP per person falls by 5 percent. D. The GDP per person rises by 5 percent. 18. Calculate the unemployment rate and the labor force participation rate in the following case: Employed = 100 million; Adult Population = 200 million; In labor force = 110 million. A. The unemployment rate is 9.1 percent and the labor force participation rate is 55 percent. B. The unemployment rate is 50 percent and the labor force participation rate is 55 percent. C. The unemployment rate is 50 percent and the labor force participation rate is 110 percent. D. None of these answers. 19. Calculate the unemployment rate and the labor force participation rate in the following case: Unemployed = 10 million; Adult Population = 200 million; Employed = 90 million. A. The unemployment rate is 50 percent and the labor force participation rate is 10 percent. B. The unemployment rate is 10 percent and the labor force participation rate is 50 percent. C. The unemployment rate is 5 percent and the labor force participation rate is 10 percent. D. The unemployment rate is 5 percent and the labor force participation rate is 55 percent. 20. It's been said that once you reach the top of the ladder of opportunity, the first thing to do is pull up the ladder behind you. Let's consider the implications of this adage for the following workers: When doctors, schoolteachers, and barbers encourage the government to make it harder for people to enter their industries, do wages tend to rise or fall for these professionals? A. This lowers the supply of these professionals which will raise the equilibrium wage in the B. This lowers the supply of these professionals which will lower the equilibrium wage in the C. This lowers the demand for these professionals which will raise the equilibrium wage in the D. This lowers the demand for these professionals which will lower the equilibrium wage in the 10 of 15 11/28/11 12:41 PM

11 21. It's been said that once you reach the top of the ladder of opportunity, the first thing to do is pull up the ladder behind you. Let's consider the implications of this adage for the following workers: If government requires higher educational and training standards for doctors, schoolteachers, and barbers, do wages tend to rise or fall for these professionals? Answer: D A. This lowers the supply of these professionals which will raise the equilibrium wage in the B. This lowers the supply of these professionals which will lower the equilibrium wage in the C. This raises the demand for these professionals which will lower the equilibrium wage in the D. This raises the demand for these professionals which will raise the equilibrium wage in the 22. According to the table below, Spain has a lower fraction of long-term unemployment than the other European countries, but a higher rate of unemployment than the other European countries in the table. What can we conclude about the kind of unemployment taking place in Spain? A. Spain has less short-term unemployment when compared to the other large European countries in the table. B. Spain has more short-term unemployment when compared to the other large European countries in the table. C. Spain has more cyclical unemployment when compared to the other large European countries in the table. D. Spain has less cyclical unemployment when compared to the other large European countries in the table. 23. In the economic way of thinking creating jobs for its own sake makes no sense. It would be better to A. let them fend for themselves. B. increase defense expenditure. C. make direct transfers to the unemployed so that can retrain in a field for which there is some demand for labor. 11 of 15 11/28/11 12:41 PM

12 D. raise taxes use the funds to increase demand for goods and services. 24. Section: Incentives According to the textbook, which of the following is the most likely reason for the increase in female labor force participation beginning around 1970? A. an increase in the cost of living B. an increase in the baby boom population C. an increase in the incentive for women to pursue job careers D. a decrease in wages for male workers 25. Section: Defining Unemployment Suppose the number of unemployed is 10 million, the number of employed is 200 million, and the nation's adult population is 323 million. Given this information, the labor force participation rate is about and the unemployment rate is about. A. 62%; 5.0% B. 62%; 4.76% C. 65%; 4.76% D. 65%; 5.0% 26. Section: Incentives According to the textbook, which of the following is the most likely reason for the increase in female labor force participation beginning around 1970? A. an increase in the cost of living B. an increase in the baby boom population C. an increase in the incentive for women to pursue job careers D. a decrease in wages for male workers 27. Section: The Natural Unemployment Rate The natural unemployment rate includes all of the following EXCEPT: A. cyclical unemployment. B. frictional unemployment. C. structural unemployment. D. none of the above: All cyclical, frictional and structural unemployment are included in the natural unemployment rate. 12 of 15 11/28/11 12:41 PM

13 28. Which of the following individuals can be counted as unemployed? Answer: D A. Darren, a ten-year-old child B. Moesha, a full-time college student C. Nazma, a stay-at-home mom D. None of the answers is correct. 29. In your country, there are 24 million people in the labor force million people are employed. What is the unemployment rate in your country? A. 10.4% B. 2.5% C. 89.6% D. 21.5% 30. In your country, the labor force participation rate is very low and the unemployment rate is also very low. Which of the following answers explains why this may be the case? A. A large percentage of the population in your country consists of children. B. A large percentage of the population is aging and thus has retired. C. A large percentage of the population is unemployed. D. None of the answers is correct. 31. Table: Labor Data Adult population Labor force Employed persons Discouraged workers 200 million 150 million million 10.5 million Reference: Ref 10-1 (Table: Labor Data) According to the accompanying labor data, the unemployment rate is and the labor force participation rate is. Answer: D A. 7%; 60.4% B. 0.7%; 99.3% C. 5.6%; 69.4% D. 7.5%; 75% 32. Why has technology lowered frictional unemployment over time? 13 of 15 11/28/11 12:41 PM

14 I. Many people who used to be frictionally unemployed are now employed in the technology sector. II. The Internet has made it easier and faster for people to search for jobs that require their particular skill sets. III. The Internet has made job postings easier and faster for employers. A. I and II only B. II and III only C. I and III only D. I, II, and III 33. The popularity of Barnes & Noble and Borders shifted workers from independent bookshops to larger chains. What type of unemployment is associated with this reallocation of the work force? A. frictional unemployment B. technological substitution C. creative destruction D. structural unemployment 34. Jasmine has recently moved to Florida because she loves the warm climate there. Because she is new to the area, she will need to spend a few weeks looking for a new job. This is an example of: A. frictional unemployment. B. structural unemployment. C. cyclical unemployment. D. underemployment. 35. According to the textbook, Joseph Schumpeter's creative destruction results in: A. frictional unemployment. B. structural unemployment. C. cyclical unemployment. D. underemployment. 36. The United States' shift toward more of a service economy and less of a manufacturing economy has caused an increase in: A. frictional unemployment. B. structural unemployment. C. cyclical unemployment. D. seasonal unemployment. 37. Friday and Crusoe have been exchanging fish and cocos for years. One day Friday comes to Crusoe 14 of 15 11/28/11 12:41 PM

15 and says I m done with fish What is the appropriate policy response? A. Govt should help Crusoe find something to do that Friday would like more than Friday's leisure. B. Govt should buy the surplus fish and give it to the poor on a neighboring island. C. Govt should buy cocos from the neighboring island and give them to the Crusoe. D. Govt should control the price of fish, making it cheaper so that Friday will increase his demand for fish. 38. Outsourcing and offshoring decreases jobs in short run. In the long run A. employment continues to fall as firms move on to new opportunities in yet poorer countries. B. employment increases due to trade and specialization that offshoring and outsourcing creates. C. employment increases due to lower wages. D. employment falls as communities rebel and demonstrate against job loss. 39. Economic policy that prevents firms from firing workers Answer: D A. has worked well in Europe to reduce the rate of unemployment there. B. is good for less productive workers who may not be able to find work. C. is bad since unproductive workers will quickly fill all jobs. D. also prevents firms from hiring workers. 40. Assume we are in the steady state. An increase in employment in the Solow model will cause A. the income per worker to rise. B. the capital-labor ratio to fall below the steady state value. C. the capital-labor ratio to fall and keep falling. D. income per worker to decrease as the marginal product of capital rises. 15 of 15 11/28/11 12:41 PM

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