MULTIPLE CHOICE QUESTIONS TESTBANK –

CHAPTER 21
Go to memorandum

Answer the following questions by selecting the appropriate answer from the list below.

Question 1
People leave the labour force when they:
A. find employment.
B. become unemployed.
C. retire.
D. work in the informal sector.
E. all of the above

Question 2
Which one of the following statements is true? In South Africa:
A. rising unemployment has been associated with increased foreign competition.
B. school-leavers, who cannot find employment, qualify for unemployment benefits.
C. most unemployment is frictional unemployment.
D. all unemployment is voluntary.
E. there is a negative correlation between unemployment and crime.

Question 3
If a country’s rate of unemployment increases then we can conclude that:
A. the country is experiencing jobless growth.
B. no new jobs are being created.
C. GDP growth must be falling.
D. the proportion of people of working age who want employment and who cannot find
employment is increasing.
E. all of the above are true.

© VAN SCHAIK PUBLISHERS

Question 4
During an economic downturn, sales fall and some workers lose their jobs. This unemployment is
referred to as:
A. seasonal unemployment.
B. frictional unemployment.
C. cyclical unemployment.
D. structural unemployment.
E. technological unemployment.

Question 5
Pitso resigns his job as an economist in Durban and moves to Port Elizabeth to be closer his parents.
It takes Pitso three months to find new employment as an economist in Port Elizabeth. During these
three months, Pitso was:
A. structurally unemployed.
B. seasonally unemployed.
C. cyclically unemployed.
D. casually unemployed.
E. frictionally unemployed.

Question 6
Which of the following situations describe structural unemployment?
i. Julia is qualified as an economist, but cannot find employment because employers
prefer to hire male economists.
ii. Jacob used to work in a gold mine and lost his job after the price of gold fell and the
mine closed.
iii. Johanna is a typist and cannot find employment because she does not know how to
use a word processor (personal computer).
iv. Jim can only find work as a tourist guide on the Cape Wine Route during the summer
months.

A. i, ii and iii
B. i, ii, iii and iv
C. ii, iii and iv
D. i and iv
E. i, ii and iv

© VAN SCHAIK PUBLISHERS

Question 7
Reasons on the demand-side of the labour market for increasing unemployment in South Africa
could include:
i. an increase in population growth.
ii. an increase in the capital intensity of production.
iii. an increase in immigration.
iv. a decrease in the production of goods and services.
v. an increase in the cost of employing labour.

A. i, iii and v
B. i, ii and iv
C. ii, iv and v
D. ii and iv
E. i and iii

Question 8
Which of the following might be expected to generate employment?
A. Economic growth that is capital intensive.
B. Higher taxes for small businesses.
C. An increase in the wage rate, ceteris paribus.
D. A fall in the productivity of workers.
E. The promotion of exports and investment.

Question 9
Which of the following would NOT be expected to generate employment?
A. Easier access to credit for small business.
B. Public works programmes.
C. An increase in imports.
D. An increase in the labour intensity of production.
E. A decrease in the relative price of labour.

Question 10
In an industry, if wages increase more than the productivity of workers, we would expect:
A. an upward pressure on prices.
B. a decrease in unemployment.
C. investment in the industry to increase.
D. costs of production to fall.
E. the demand for labour to rise.

© VAN SCHAIK PUBLISHERS

Question 11
A rightward shift of the Phillips curve:
A. indicates that the trade-off between inflation and unemployment has become less severe.
B. is associated with deflation.
C. might be the result of a decrease in the price of imported capital goods.
D. indicates an expansion in economic output.
E. indicates that every level of inflation is associated with more unemployment than before.

Question 12
Stagflation refers to:
A. stagnant prices.
B. hyperinflation.
C. the trade-off between inflation and unemployment.
D. rising inflation accompanied by rising unemployment.
E. jobless growth.

Question 13
The expanded definition of unemployment in South Africa includes those people who:
A. do not work full time.
B. are available for employment but who are not actively seeking employment.
C. do not earn a wage above the minimum wage.
D. work in the informal sector.
E. A and B above.

Question 14
In South Africa, the strict definition (and rate) of unemployment is different from the expanded or
broad definition (or rate) of unemployment because the strict rate excludes:

A. people working in the informal sector.

B. people who are involuntarily unemployed.
C. people who work in subsistence agriculture.
D. discouraged work-seekers who are not actively looking for work.
E. all of the above.

© VAN SCHAIK PUBLISHERS

Question 15
Which one of the following policy measures is appropriate to solve the problem of cyclical
unemployment?
A. Improvement in the quality of labour.
B. A decrease in the labour supply.
C. An increase in investment spending.
D. An increase in the labour intensity of production.

Question 16
Which one of the following statements is correct?

A. It is very easy to measure unemployment.

B. The unemployment rate is obtained by expressing the number of unemployed persons as a
percentage of the total population of the country.
C. According to the strict definition of unemployment, only those people who actively look for
a job are classified as unemployed.
D. According to the expanded definition of unemployment the mere desire to find a job is not
sufficient for a person to be classified as being unemployed.
E. The expanded definition of unemployment is currently the official definition in South
Africa.

Question 17
Which one of the following statements is incorrect?

The strict definition of unemployment:

A. includes only persons 15 years and older.

B. excludes persons who are in paid employment or self-employment.
C. excludes people who were not available for employment or self-employment during the
seven days prior to the interview.
D. includes persons who did not take steps during the four weeks preceding the interview to
find paid employment or self-employment.
E. is currently the official definition of unemployment in South Africa.

© VAN SCHAIK PUBLISHERS

Question 18
The expanded definition of unemployment:

A. includes people of all ages.

B. requires that persons should have taken specific steps to find employment or self-
employment.
C. requires only a desire to find employment.
D. yields a lower unemployment rate than the strict definition.
E. is currently the official definition of unemployment in South Africa.

Question 19
Which one of the following statements is incorrect?

People engage in informal sector activity:

A. because they cannot find employment in the formal sector.

B. because they do not want to pay tax.
C. because they are engaged in illegal activity.
D. because they want to register for government grants.

Question 20
Which one of the following statements is incorrect?

A. The informal sector comprises both legal and illegal activities.

B. The informal sector is sometimes also called the unrecorded economy, the shadow
economy, the hidden economy or the underground economy.
C. When economic growth decreases, informal sector activity tends to increase.
D. No provision is made for informal sector activity when the South African national accounts
are compiled.
E. The informal sector in South Africa has grown significantly in recent decades.

Question 21
Which one of the following statements is incorrect?

A. The costs of unemployment are much less than the costs of inflation.
B. Unemployment entails costs to individual as well as to society.
C. Even the best system of unemployment benefits cannot eliminate the costs of
unemployment to an unemployed person.
D. Prolonged unemployment may result in a loss of skills.
E. Unemployment tends to have serious social and political effects.

© VAN SCHAIK PUBLISHERS

Question 22
Which one of the following is not a recognised type or category of unemployment?

A. Fiscal unemployment.
B. Frictional unemployment.
C. Seasonal unemployment.
D. Cyclical unemployment.
E. Structural unemployment.

Question 23
Tommy works as a tourist guide in Cape Town from September to April. From May to August he does
not have a job. During this period he is:

A. fiscally unemployed.
B. frictionally unemployed.
C. seasonally unemployed.
D. cyclically unemployed.
E. structurally unemployed.

Question 24
Susan resigned from her job at Absa and is looking for a better job. She is currently:

A. fiscally unemployed.
B. frictionally unemployed.
C. seasonally unemployed.
D. cyclically unemployed.
E. structurally unemployed.

Question 25
Jackson worked at the BMW plant in Rosslyn but was laid off due to a decrease in the demand for
motorcars. He will be re-hired when the demand picks increases. Jackson is currently:

A. fiscally unemployed.
B. frictionally unemployed.
C. seasonally unemployed.
D. cyclically unemployed.
E. structurally unemployed.

© VAN SCHAIK PUBLISHERS

Question 26
Susan works as a fruit picker in Ceres during the summer months. During the winter months she
does not have a job. She is then:

A. fiscally unemployed.
B. frictionally unemployed.
C. seasonally unemployed.
D. cyclically unemployed.
E. structurally unemployed.

Question 27
Thabo worked on the gold mines but lost his job along with thousands of others due to the general
decline in gold mining in South Africa. Thabo is:

A. fiscally unemployed.
B. frictionally unemployed.
C. seasonally unemployed.
D. cyclically unemployed.
E. structurally unemployed.

Question 28
Peter worked in the automotive industry but his work is now done by a robot. Peter is:

A. fiscally unemployed.
B. frictionally unemployed.
C. seasonally unemployed.
D. cyclically unemployed.
E. structurally unemployed.

Question 29
Spokanje cannot find a job because he left school in grade 8. Spokanje is:

A. fiscally unemployed.
B. frictionally unemployed.
C. seasonally unemployed.
D. cyclically unemployed.
E. structurally unemployed.

© VAN SCHAIK PUBLISHERS

Question 30
Which one of the following is not a possible source of structural unemployment?

A. Changing consumer preferences.

B. A temporary recession in the economy.
C. A structural decline in certain industries.
D. A lack of skills.
E. A switch from labour intensive to capital intensive production methods.

Question 31
Which one of the following statements is correct?

A. Discrimination is a possible source of cyclical unemployment.

B. A switch to capital intensive production methods is a possible source of frictional
unemployment.
C. Increased foreign competition is an important source of seasonal unemployment.
D. A temporary lack of demand in the economy is an important source of structural
unemployment.
E. A lack of the necessary education, training or skills is an important potential cause of
structural unemployment.

Question 32
Unemployment in South Africa consists mainly of:

A. fiscal unemployment.
B. frictional unemployment.
C. seasonal unemployment.
D. cyclical unemployment.
E. structural unemployment.

Question 33
Which one of the following should not form part of a strategy to combat unemployment in South
Africa?

A. Steps to limit the supply of labour.

B. Steps to stimulate the demand for labour.
C. Steps to increase the labour intensity of production.
D. Steps to increase the capital intensity of production.
E. Steps to promote small businesses and the informal sector.

© VAN SCHAIK PUBLISHERS

Question 34
Which one of the following should not form part of a strategy to combat unemployment in South
Africa?

A. An artificially overvalued currency.

B. Birth control programmes.
C. Stricter immigration control.
D. Skills development programmes.
E. Special employment programmes.

Question 35
Which one of the following statements is correct?

A. There tends to be an inverse relationship between production (output) and employment.

B. If output increases, the unemployment rate will always decrease.
C. It is unlikely that employment will increase if output does not increase.
D. A production function indicates the relationship between total production and aggregate
demand in the economy.
E. An increase in real production is a sufficient condition for reducing unemployment.

Question 36
According to the Phillips curve, there is:

A. no relationship between inflation and unemployment

B. an inverse relationship between inflation and unemployment
C. a positive relationship between inflation and unemployment
D. no trade-off between inflation and unemployment.

Question 37
Which one of the following statement is incorrect?

According to the Phillips curve:

A. an increase in aggregate demand will result in an increase in production.

B. an increase in aggregate demand will result in increase in prices.
C. an increase in aggregate demand will result in a decrease in unemployment.
D. a decrease in aggregate demand will result in a decrease in production.
E. a decrease in aggregate demand will result in a decrease in unemployment

© VAN SCHAIK PUBLISHERS

Question 38
Which one of the following statements is incorrect?

A. The Phillips curve analysis suggests that there is a trade-off between inflation and
unemployment.
B. According to the original Phillips curve, policymakers can achieve lower inflation by
accepting higher unemployment.
C. According to the original Phillips curve, policymakers can achieve lower unemployment by
accepting higher inflation.
D. The original Phillips curve provides a good illustration of stagflation.
E. Many economists argue that the long-run Phillips curve is vertical, indicating the absence
of any trade-off between inflation and unemployment.

© VAN SCHAIK PUBLISHERS

 MULTIPLE CHOICE QUESTIONS TESTBANK –
CHAPTER 22
MEMORANDUM
Go back to Multiple Choice Questions

Answer the following questions by selecting the appropriate answer from the list below.

Question 1
People leave the labour force when they:
A. find employment.
B. become unemployed.
C. retire.
D. work in the informal sector.
E. all of the above

Question 2
Which one of the following statements is true? In South Africa:
A. rising unemployment has been associated with increased foreign competition.
B. school-leavers, who cannot find employment, qualify for unemployment benefits.
C. most unemployment is frictional unemployment.
D. all unemployment is voluntary.
E. there is a negative correlation between unemployment and crime.

Question 3
If a country’s rate of unemployment increases then we can conclude that:
A. the country is experiencing jobless growth.
B. no new jobs are being created.
C. GDP growth must be falling.
D. the proportion of people of working age who want employment and who cannot find
employment is increasing.
E. all of the above are true.

© VAN SCHAIK PUBLISHERS

Question 4
During an economic downturn, sales fall and some workers lose their jobs. This unemployment is
referred to as:
A. seasonal unemployment.
B. frictional unemployment.
C. cyclical unemployment.
D. structural unemployment.
E. technological unemployment.

Question 5
Pitso resigns his job as an economist in Durban and moves to Port Elizabeth to be closer his parents.
It takes Pitso three months to find new employment as an economist in Port Elizabeth. During these
three months, Pitso was:
A. structurally unemployed.
B. seasonally unemployed.
C. cyclically unemployed.
D. casually unemployed.
E. frictionally unemployed.

Question 6
Which of the following situations describe structural unemployment?
i. Julia is qualified as an economist, but cannot find employment because employers
prefer to hire male economists.
ii. Jacob used to work in a gold mine and lost his job after the price of gold fell and the
mine closed.
iii. Johanna is a typist and cannot find employment because she does not know how to use
a word processor (personal computer).
iv. Jim can only find work as a tourist guide on the Cape Wine Route during the summer
months.

A. i, ii and iii
B. i, ii, iii and iv
C. ii, iii and iv
D. i and iv
E. i, ii and iv

© VAN SCHAIK PUBLISHERS

Question 7
Reasons on the demand-side of the labour market for increasing unemployment in South Africa
could include:
i. an increase in population growth.
ii. an increase in the capital intensity of production.
iii. an increase in immigration.
iv. a decrease in the production of goods and services.
v. an increase in the cost of employing labour.

A. i, iii and v
B. i, ii and iv
C. ii, iv and v
D. ii and iv
E. i and iii

Question 8
Which of the following might be expected to generate employment?
A. Economic growth that is capital intensive.
B. Higher taxes for small businesses.
C. An increase in the wage rate, ceteris paribus.
D. A fall in the productivity of workers.
E. The promotion of exports and investment.

Question 9
Which of the following would NOT be expected to generate employment?
A. Easier access to credit for small business.
B. Public works programmes.
C. An increase in imports.
D. An increase in the labour intensity of production.
E. A decrease in the relative price of labour.

Question 10
In an industry, if wages increase more than the productivity of workers, we would expect:
A. an upward pressure on prices.
B. a decrease in unemployment.
C. investment in the industry to increase.
D. costs of production to fall.
E. the demand for labour to rise.

© VAN SCHAIK PUBLISHERS

Question 11
A rightward shift of the Phillips curve:
A. indicates that the trade-off between inflation and unemployment has become less severe.
B. is associated with deflation.
C. might be the result of a decrease in the price of imported capital goods.
D. indicates an expansion in economic output.
E. indicates that every level of inflation is associated with more unemployment than before.

Question 12
Stagflation refers to:
A. stagnant prices.
B. hyperinflation.
C. the trade-off between inflation and unemployment.
D. rising inflation accompanied by rising unemployment.
E. jobless growth.

Question 13
The expanded definition of unemployment in South Africa includes those people who:
A. do not work full time.
B. are available for employment but who are not actively seeking employment.
C. do not earn a wage above the minimum wage.
D. work in the informal sector.
E. A and B above.

Question 14
In South Africa, the strict definition (and rate) of unemployment is different from the expanded or
broad definition (or rate) of unemployment because the strict rate excludes:

A. people working in the informal sector.

B. people who are involuntarily unemployed.
C. people who work in subsistence agriculture.
D. discouraged work-seekers who are not actively looking for work.
E. all of the above.

© VAN SCHAIK PUBLISHERS

Question 15
Which one of the following policy measures is appropriate to solve the problem of cyclical
unemployment?
A. Improvement in the quality of labour.
B. A decrease in the labour supply.
C. An increase in investment spending.
D. An increase in the labour intensity of production.

Question 16
Which one of the following statements is correct?

A. It is very easy to measure unemployment.

B. The unemployment rate is obtained by expressing the number of unemployed persons
as a percentage of the total population of the country.
C. According to the strict definition of unemployment, only those people who actively look
for a job are classified as unemployed.
D. According to the expanded definition of unemployment the mere desire to find a job is
not sufficient for a person to be classified as being unemployed.
E. The expanded definition of unemployment is currently the official definition in South
Africa.

Question 17
Which one of the following statements is incorrect?

The strict definition of unemployment:

A. includes only persons 15 years and older.

B. excludes persons who are in paid employment or self-employment.
C. excludes people who were not available for employment or self-employment during the
seven days prior to the interview.
D. includes persons who did not take steps during the four weeks preceding the interview
to find paid employment or self-employment.
E. is currently the official definition of unemployment in South Africa.

© VAN SCHAIK PUBLISHERS

Question 18
The expanded definition of unemployment:

A. includes people of all ages.

B. requires that persons should have taken specific steps to find employment or self-
employment.
C. requires only a desire to find employment.
D. yields a lower unemployment rate than the strict definition.
E. is currently the official definition of unemployment in South Africa.

Question 19
Which one of the following statements is incorrect?

People engage in informal sector activity:

A. because they cannot find employment in the formal sector.

B. because they do not want to pay tax.
C. because they are engaged in illegal activity.
D. because they want to register for government grants.

Question 20
Which one of the following statements is incorrect?

A. The informal sector comprises both legal and illegal activities.

B. The informal sector is sometimes also called the unrecorded economy, the shadow
economy, the hidden economy or the underground economy.
C. When economic growth decreases, informal sector activity tends to increase.
D. No provision is made for informal sector activity when the South African national
accounts are compiled.
E. The informal sector in South Africa has grown significantly in recent decades.

Question 21
Which one of the following statements is incorrect?

A. The costs of unemployment are much less than the costs of inflation.
B. Unemployment entails costs to individual as well as to society.
C. Even the best system of unemployment benefits cannot eliminate the costs of
unemployment to an unemployed person.
D. Prolonged unemployment may result in a loss of skills.
E. Unemployment tends to have serious social and political effects.

© VAN SCHAIK PUBLISHERS

Question 22
Which one of the following is not a recognised type or category of unemployment?

A. Fiscal unemployment.
B. Frictional unemployment.
C. Seasonal unemployment.
D. Cyclical unemployment.
E. Structural unemployment.

Question 23
Tommy works as a tourist guide in Cape Town from September to April. From May to August he does
not have a job. During this period he is:

A. fiscally unemployed.
B. frictionally unemployed.
C. seasonally unemployed.
D. cyclically unemployed.
E. structurally unemployed.

Question 24
Susan resigned from her job at Absa and is looking for a better job. She is currently:

A. fiscally unemployed.
B. frictionally unemployed.
C. seasonally unemployed.
D. cyclically unemployed.
E. structurally unemployed.

Question 25
Jackson worked at the BMW plant in Rosslyn but was laid off due to a decrease in the demand for
motorcars. He will be re-hired when the demand picks increases. Jackson is currently:

A. fiscally unemployed.
B. frictionally unemployed.
C. seasonally unemployed.
D. cyclically unemployed.
E. structurally unemployed.

© VAN SCHAIK PUBLISHERS

Question 26
Susan works as a fruit picker in Ceres during the summer months. During the winter months she
does not have a job. She is then:

A. fiscally unemployed.
B. frictionally unemployed.
C. seasonally unemployed.
D. cyclically unemployed.
E. structurally unemployed.

Question 27
Thabo worked on the gold mines but lost his job along with thousands of others due to the general
decline in gold mining in South Africa. Thabo is:

A. fiscally unemployed.
B. frictionally unemployed.
C. seasonally unemployed.
D. cyclically unemployed.
E. structurally unemployed.

Question 28
Peter worked in the automotive industry but his work is now done by a robot. Peter is:

A. fiscally unemployed.
B. frictionally unemployed.
C. seasonally unemployed.
D. cyclically unemployed.
E. structurally unemployed.

Question 29
Spokanje cannot find a job because he left school in grade 8. Spokanje is:

A. fiscally unemployed.
B. frictionally unemployed.
C. seasonally unemployed.
D. cyclically unemployed.
E. structurally unemployed.

© VAN SCHAIK PUBLISHERS

Question 30
Which one of the following is not a possible source of structural unemployment?

A. Changing consumer preferences.

B. A temporary recession in the economy.
C. A structural decline in certain industries.
D. A lack of skills.
E. A switch from labour intensive to capital intensive production methods.

Question 31
Which one of the following statements is correct?

A. Discrimination is a possible source of cyclical unemployment.

B. A switch to capital intensive production methods is a possible source of frictional
unemployment.
C. Increased foreign competition is an important source of seasonal unemployment.
D. A temporary lack of demand in the economy is an important source of structural
unemployment.
E. A lack of the necessary education, training or skills is an important potential cause of
structural unemployment.

Question 32
Unemployment in South Africa consists mainly of:

A. fiscal unemployment.
B. frictional unemployment.
C. seasonal unemployment.
D. cyclical unemployment.
E. structural unemployment.

Question 33
Which one of the following should not form part of a strategy to combat unemployment in South
Africa?

A. Steps to limit the supply of labour.

B. Steps to stimulate the demand for labour.
C. Steps to increase the labour intensity of production.
D. Steps to increase the capital intensity of production.
E. Steps to promote small businesses and the informal sector.

© VAN SCHAIK PUBLISHERS

Question 34
Which one of the following should not form part of a strategy to combat unemployment in South
Africa?

A. An artificially overvalued currency.

B. Birth control programmes.
C. Stricter immigration control.
D. Skills development programmes.
E. Special employment programmes.

Question 35
Which one of the following statements is correct?

A. There tends to be an inverse relationship between production (output) and

employment.
B. If output increases, the unemployment rate will always decrease.
C. It is unlikely that employment will increase if output does not increase.
D. A production function indicates the relationship between total production and aggregate
demand in the economy.
E. An increase in real production is a sufficient condition for reducing unemployment.

Question 36
According to the Phillips curve, there is:

A. no relationship between inflation and unemployment

B. an inverse relationship between inflation and unemployment
C. a positive relationship between inflation and unemployment
D. no trade-off between inflation and unemployment.

Question 37
Which one of the following statement is incorrect?

According to the Phillips curve:

A. an increase in aggregate demand will result in an increase in production.

B. an increase in aggregate demand will result in increase in prices.
C. an increase in aggregate demand will result in a decrease in unemployment.
D. a decrease in aggregate demand will result in a decrease in production.
E. a decrease in aggregate demand will result in a decrease in unemployment

© VAN SCHAIK PUBLISHERS

Question 38
Which one of the following statements is incorrect?

A. The Phillips curve analysis suggests that there is a trade-off between inflation and
unemployment.
B. According to the original Phillips curve, policymakers can achieve lower inflation by
accepting higher unemployment.
C. According to the original Phillips curve, policymakers can achieve lower unemployment
by accepting higher inflation.
D. The original Phillips curve provides a good illustration of stagflation.
E. Many economists argue that the long-run Phillips curve is vertical, indicating the
absence of any trade-off between inflation and unemployment.

© VAN SCHAIK PUBLISHERS