Chapter 7 Long Run and Short Run Concerns: Growth, Productivity,
Unemployment, and Inflation
Principles of Macroeconomics, Case/Fair, 8e
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7.1 Long Run Output and Productivity Growth
Multiple Choice
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1)
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Which of the following is NOT a desirable feature in an economy?
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A)
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Rapid increase in output per worker
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B)
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Rapid increase in the general price level
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C)
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Low unemployment
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D)
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Low inflation
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2)
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Which of the following is a desirable characteristic in an economy?
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A)
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High inflation.
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B)
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Rapid increase in the general price level
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C)
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Low unemployment
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D)
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Low employment.
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3)
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Output in an economy can be increased by
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A)
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adding more workers.
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B)
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limiting the work week.
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C)
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using fewer machines
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D)
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all of the above.
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4)
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Human capital is
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A)
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the machines people own.
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B)
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the money people have.
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C)
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the mental or physical skills people have.
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D)
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the property people own.
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5)
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A prolonged and deep recession is a
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A)
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hyperinflation.
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B)
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slowdown.
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C)
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contraction.
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D)
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depression.
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6)
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Which of the following is considered capital?
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A)
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A factory a company builds to produce other output.
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B)
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A tractor produced by John Deere.
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C)
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The knowledge an individual acquires through education.
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D)
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All of the above
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True/False
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1)
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The only source of economic growth is growth in the number of workers in the economy.
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2)
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Workers who take a job related training course are enhancing their human capital.
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3)
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If the population is growing as fast the economy, then per capita output is growing.
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4)
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If more workers have more capital to work with, then production will increase.
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5)
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Productivity is output per worker hour.
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7.2 Recessions, Depressions, and Unemployment
Multiple Choice
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1)
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We can safely say that total output can increase if there is a(n)
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A)
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increase in the size of the labor force and a decrease in the productivity of workers.
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B)
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decrease in the size of capital and an increase in the productivity of machines.
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C)
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increase in the number of machines per worker.
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D)
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decrease in the number of workers per machine.
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2)
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The productivity of workers is defined as the
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A)
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total output produced by the labor force.
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B)
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output produced by a worker per hour.
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C)
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number of hours a worker spends at work.
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D)
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number of hours it takes a worker to produce a unit of output.
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3)
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The capital per worker ratio is a measure of
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A)
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how many tools or machines each worker has to work with.
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B)
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how productive workers are.
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C)
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how much GDP is growing.
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D)
1
All of the above
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4)
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Productivity is the ratio of
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A)
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total output to the total number of worker hours.
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B)
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total output to the total population.
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C)
1
total output to the total number of unemployed.
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D)
1
total capital to the total number of workers.
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5)
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Bob is unemployed if he
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A)
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is temporarily laid off.
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B)
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is not looking for a job.
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C)
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has looked for a job for two months and then quit looking.
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D)
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A and C are correct.
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6)
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For you to be considered out of the labor force, you can be
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A)
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a full-time student.
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B)
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a full-time retiree.
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C)
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a full-time volunteer.
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D)
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any of the above.
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7)
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Janie graduated from college a month ago and is now without work. She accepted a job that will start next month. Today, Janie is
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A)
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not in the labor force.
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B)
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in the labor force.
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C)
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employed.
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D)
1
a discouraged worker.
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8)
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The number of people unemployed equals
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A)
1
the number of people employed minus the labor force.
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B)
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the labor force plus the number of people employed.
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C)
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the labor force minus the number of people employed.
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D)
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the number of people employed divided by the labor force.
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9)
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Bob retired from the police force. He started working an hour or two a day at a paid job in city's courthouse. Bob is
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A)
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employed.
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B)
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in the labor force.
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C)
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unemployed.
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D)
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not in the labor force.
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Refer to the information provided in Table 7.1 below to answer the questions that follow.
Table 7.1
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10)
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Refer to Table 7.1. The labor force equals
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A)
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13,000 people.
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B)
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12,500 people.
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C)
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13,500 people.
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D)
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15,500 people.
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11)
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Refer to Table 7.1. The unemployment rate is
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A)
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20%.
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B)
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18.5%.
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C)
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16.1%.
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D)
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35.5%.
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12)
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Refer to Table 7.1. The labor-force participation rate is
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A)
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71.43%.
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B)
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81.8%.
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C)
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90.91%.
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D)
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80.0%.
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13)
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Refer to Table 7.1. The employment rate is
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A)
1
81.5%.
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B)
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66.7%.
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C)
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80%.
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D)
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20%.
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14)
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Which of the following is correct? The unemployment rate is
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A)
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unemployed/population × 100.
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B)
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(employed - unemployed)/labor force × 100.
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C)
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(labor force - employed)/labor force × 100.
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D)
1
(employed - labor force)/employed × 100.
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15)
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The number of people classified as employed is 220,000 and the number of people classified as unemployed is 20,000. The size of the labor force
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A)
1
equals 240,000.
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B)
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equals 250,000.
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C)
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equals 200,000.
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D)
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cannot be determined from this information.
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16)
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The number of people classified as employed is 575,000 and the number of people in the labor force is 700,000. The total number of people classified as unemployed is
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A)
1
200,000.
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B)
1
125,000.
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C)
1
150,000.
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D)
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1.275 million.
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17)
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If the number of people classified as unemployed is 50,000 and the number of people classified as employed is 300,000, what is the unemployment rate?
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A)
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8%
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B)
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14.3%
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C)
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16.67%
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D)
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11.5%
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18)
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If the labor force is 260,000 and the total population 16 years of age or older is 300,000, the labor-force participation rate is
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A)
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79.5%.
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B)
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83.3%.
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C)
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86.7%.
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D)
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80.9%.
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19)
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If the labor-force participation rate is 87% and the total population 16 years of age or older is 1 million people, the labor force is
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A)
1
280,000 people.
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B)
1
870,000 people.
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C)
1
850,000 people.
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D)
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180,000 people.
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20)
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If the number of unemployed equals 30,000, the number of employed equals 60,000, and the number not in the labor force is 10,000, the labor-force participation rate
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A)
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is 90%.
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B)
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is 67%.
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C)
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is 88.9%.
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D)
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cannot be determined from this information.
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21)
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When an individual quits his/her job and decides to stay at home for a while, the labor-force participation rate
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A)
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decreases.
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B)
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increases.
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C)
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stays the same.
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D)
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may increase or decrease, depending on the length of time he/she stays at home.
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22)
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Discouraged workers are
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A)
1
part of the labor force.
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B)
1
part of structural unemployment.
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C)
1
part of frictional unemployment.
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D)
1
None of the above
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23)
1
When 100 people who were previously looking for jobs stop looking for jobs, the
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A)
1
unemployment rate increases.
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B)
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size of the labor force decreases.
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C)
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labor-force participation rate does not change.
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D)
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unemployment rate does not change.
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24)
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In normal times the number of discouraged workers is approximately ________ of the labor force.
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A)
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.5%
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B)
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4%
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C)
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3%
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D)
1
1%
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25)
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Which of the following statements is TRUE?
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A)
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It is possible for the national unemployment rate to be 10% and a state to have an unemployment rate of only 5%.
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B)
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An unemployment rate of 10% means that the unemployment rate in each sector of the economy is 10%.
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C)
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An unemployment rate of 10% means that on average people have been unemployed for 10% of the year.
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D)
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Both A and C
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26)
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Which of the following statements is TRUE?
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A)
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The unemployment rate does not tell us anything about the duration of unemployment.
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B)
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The duration of unemployment decreases during recessions.
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C)
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The duration of unemployment increases during economic expansions.
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D)
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Both A and B are correct.
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1
27)
1
When an economics professor quits his/her job at a university and starts looking for a better job in another university, he/she is
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A)
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frictionally unemployed.
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B)
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structurally unemployed.
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C)
1
cyclically unemployed.
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D)
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naturally unemployed.
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28)
1
Frictional unemployment arises because
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A)
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there is no job for those who seek employment.
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B)
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there is a job for those who seek employment, but they haven't found it yet.
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C)
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those who seek employment are not qualified to perform the jobs they are looking for.
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D)
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the economy is in a recession.
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29)
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Increasing the efficiency of various employment agencies to find better matches for those looking for jobs will
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A)
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reduce the natural rate of unemployment.
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B)
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reduce structural unemployment.
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C)
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reduce cyclical unemployment.
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D)
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not affect frictional unemployment.
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30)
1
When the Fed slows the rate of growth of the money supply to slow down the economy, the unemployment type that will be directly affected is the
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A)
1
frictional unemployment.
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B)
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structural unemployment.
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C)
1
cyclical unemployment.
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D)
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natural rate of unemployment.
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31)
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Structural unemployment is the
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A)
1
portion of unemployment that is due to changes in the structure of the economy that result in a significant loss of jobs in certain industries.
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B)
1
unemployment that occurs during recessions and depressions.
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C)
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portion of unemployment that is due to the normal working of the labor market.
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D)
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unemployment that results when people become discouraged about their chances of finding a job so they stop looking for work.
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32)
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An auto worker in Ohio who loses her job because the company relocated the plant to another country represents an example of
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A)
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frictional unemployment.
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B)
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structural unemployment.
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C)
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cyclical unemployment.
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D)
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natural unemployment.
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33)
1
An individual who cannot find a job because his or her job skills have become obsolete is an example of
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A)
1
frictional unemployment.
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B)
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structural unemployment.
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C)
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cyclical unemployment.
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D)
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seasonal unemployment.
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34)
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The natural rate of unemployment is generally thought of as the
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A)
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ratio of the frictional unemployment rate to the cyclical unemployment rate.
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B)
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sum of structural unemployment and cyclical unemployment.
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C)
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sum of frictional unemployment and cyclical unemployment.
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D)
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sum of frictional unemployment and structural unemployment.
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35)
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Estimates for the natural rate of unemployment in the United States range from
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A)
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4% to 6%.
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B)
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4% to 10%.
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C)
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4% to 5%.
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D)
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4% to 8%.
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36)
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If the labor market becomes more efficient so that the unemployed are more quickly matched with jobs, then
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A)
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the natural rate of unemployment will increase.
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B)
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the natural rate of unemployment will decrease.
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C)
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the natural rate of unemployment will not change.
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D)
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the natural rate of unemployment could either increase or decrease.
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37)
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During the Great Depression, real output fell by approximately ________ and the unemployment rate rose to about ________.
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A)
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15%; 15%
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B)
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25%; 30%
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C)
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30%; 40%
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D)
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30%; 25%
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1
True/False
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1)
1
When more people who are not working start looking for jobs, the labor-force participation rate increases.
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2)
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Labor productivity is total output divided by the total number of worker hours.
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3)
1
An increase in search costs will decrease structural unemployment.
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4)
1
The natural rate of unemployment is the unemployment rate during a period of full employment.
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5)
1
Anyone 16 years of age or older who is not classified as employed is classified as unemployed.