Practice Quizzes - Unemployment

Topic 6: UNEMPLOYMENT

I. TERMS AND DEFINITIONS : Choose a definition for each key term

1. Cyclical unemployment

2. Labor force

3. Unemployment rate

4. Labor-force participation rate

5. Discouraged workers

6. Structural unemployment

7. Efficiency wages

8. Frictional unemployment

9. Unemployment insurance

a. Workers who stop looking for work due to unsuccessful job search
b. The deviation of the unemployment rate from its natural rate.
c. Wages voluntarily paid in excess of the competitive equilibrium wage to increase worker
productivity.
d. Percentage of the labor force that is unemployed.
e. Percentage of the adult population in the labor force.
f. Temporary financial assistance for unemployed persons while they look for work or upgrade their
skills
g. The sum of persons who are either unemployed or employed.
h. Unemployment that results from the number of jobs available in some labor markets is insufficient
for the number of workers
i. Unemployment occurs when workers spend time searching for the jobs that best suit their skills and
tastes.

II. TRUE OR FALSE? EXPLAIN YOUR CHOICE BRIEFLY

1. Government policy can do nothing about the natural rate of unemployment
2. Full-time students are counted as unemployed
3. A minimum wage is likely to have a greater impact on the market for skilled worker than on the
market for unskilled workers.

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 Practice Quizzes - Unemployment

4. Matt loses his job and decides to sit around at home for a few months. Ceteris paribus, the
unemployment rate increases, and the labor-force participation rate decreases.
5. Unemployment due to job search is best classified as structural unemployment.

III. PROBLEM SOLVING

The Bureau of Labor Statistics announced that in April 2010, of all adult Americans,139,455,000
were employed, 15,260,000 were unemployed, and 82,614,000 were not in the labor force. Use this
information to calculate:
a. the adult population
b. the labor force
c. the labor-force participation rate
d. the unemployment rate

IV. MULTIPLE-CHOICE QUESTIONS

1. Who would be included in the labor force?

a. Derrick, who is waiting for his new job to start
b. Brett, who has become discouraged looking for a job and has quit looking for awhile
c. Homer, an unpaid homemaker
d. None of the above would be included in the labor force.
2. Which of the following definitions is correct?
a. Labor force = number of employed.
b. Labor force = population – number of unemployed.
c. Unemployment Rate = (number of unemployed  [number of employed + number of
unemployed])  100.
d. Unemployment Rate = (number of unemployed  adult population)  100.
3. Rick loses his job and immediately begins looking for another. Ceteris paribus, the
unemployment rate
a. increases, and the labor-force participation rate decreases.
b. increases, and the labor-force participation rate is unaffected.
c. is unaffected, and the labor-force participation rate increases.
d. decreases, and the labor-force participation rate is unaffected.
4. The natural unemployment rate includes
a. both frictional and structural unemployment.
b. neither frictional nor structural unemployment.
c. structural, but not frictional unemployment.
d. frictional, but not structural unemployment.

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 Practice Quizzes - Unemployment

5. There will be structural unemployment if

a. some wages are kept above the equilibrium level.
b. some people choose not to work at the equilibrium wage.
c. some wages are below the equilibrium level.
d. All of the above could be correct.
6. The natural unemployment rate includes
a. both frictional and structural unemployment.
b. neither frictional nor structural unemployment.
c. structural, but not frictional unemployment.
d. frictional, but not structural unemployment.
7. Which of the following is a cause of frictional unemployment?
a. the minimum wage
b. a worker leaving a job to find one with better benefits
c. labor unions
d. All of the above are correct.
8. Economists have found evidence that receiving unemployment-insurance benefits
a. decreases the job-search effort of the unemployed.
b. has no effect on the job-search effort of the unemployed.
c. increases the job-search effort of the unemployed.
d. has an uncertain affect on the job-search effort of the unemployed.
9. Consumers decide to buy more computers and fewer typewriters. As a result, computer
companies expand production while typewriter companies lay-off workers. This is an
example of
a. structural unemployment created by efficiency wages.
b. cyclical unemployment created by a recession.
c. frictional unemployment created by a sectoral shift in demand.
d. None of the above are correct.
10. If the minimum wage was currently above the equilibrium wage, than a decrease in the
minimum wage would
a. increase both the quantity demanded and the quantity supplied of labor.
b. decrease both the quantity demanded and the quantity supplied of labor.
c. increase the quantity of labor demanded and decrease the quantity supplied.
d. decrease the quantity of labor demanded and increase the quantity supplied.

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