Chapter 6
Jobs and Unemployment
1) After graduating from college, Yunis, age 22, started working for his parent's real estate business as an unpaid assistant. He works 25 hours a week helping manage rental units . In the Current Population Survey, Yunis is considered
A) part of the labor force and unemployed.
B) part of the labor force and employed.
C) not part of the labor force.
D) a discouraged worker.
E) part of the labor force but not part of the working-age population.
Answer: B
2) If KeKe, age 32 worked 12 hours as a paid employee the week before the Current Population Survey, KeKe is classified in the Current Population Survey as ________ when calculating the unemployment rate.
A) unemployed
B) employed
C) a discouraged worker
D) not in the labor force
E) underemployed
Answer: B
3) In the Current Population Survey, a person is considered unemployed if the person
A) is without a job.
B) is working anything less than 40 hours per week.
C) is working without pay.
D) does not have a job and is actively looking for a job.
E) is working less than 20 hours per week.
Answer: D
4) The working-age population consists of all the people in the population
A) aged 16 and over.
B) aged 16 to 65.
C) aged 16 and over who are not in jail, hospital, or an institution or in the Armed Forces.
D) aged 21 and over who are not in jail, hospital, or an institution or in the Armed Forces.
E) who are employed plus the unemployed people.
Answer: C
5) The labor force consists of
A) the number of people who are employed.
B) the number of people who unemployed and who are actively seeking work.
C) the number of people in the working-age population who are employed or unemployed.
D) all people in the population aged 16 and over who are not in jail, a hospital, or an institution or in the U.S. Armed Forces.
E) the number of people who are employed minus the number of the people who are unemployed.
Answer: C
6) If Jose is 22-years old, is available to work but does not have a job and made no specific efforts to find a job for the previous month, Jose is classified in the Current Population Survey as
A) unemployed.
B) employed.
C) not in the working-age population.
D) not in the labor force.
E) in the labor force but not in the working-age population.
Answer: D
7) Assume the population is 300 million. If 200 million people are of working age, 125 million are employed, and 15 million are unemployed, what is the size of the labor force?
A) 200 million
B) 140 million
C) 125 million
D) 215 million
E) 175 million
Answer: B
8) In calculating the unemployment rate, part-time workers over the age of 16 are counted as
A) employed.
B) unemployed.
C) not in the labor force.
D) employed if they are part-time workers for noneconomic reasons and unemployed if they are involuntary part-time workers.
E) not in the working-age population.
Answer: A
9) If a significant number of part-time workers successfully find full-time employment, then
A) the unemployment rate will fall.
B) the labor force participation rate will increase..
C) the unemployment rate will remain unchanged.
D) the unemployment rate will rise.
E) Both answers A and B are correct.
Answer: C
10) In the table above, the number of unemployed people is
A) 2,000.
B) 1,000.
C) 1,100.
D) 11,000.
E) 3,000.
Answer: B
11) In the table above, the unemployment rate is
A) 12 percent.
B) 10 percent.
C) 8 percent.
D) 6 percent.
E) 11 percent.
Answer: B
12) Using the table above, the labor force participation rate is
A) 83.3 percent.
B) 90.0 percent.
C) 10.0 percent.
D) 11.1 percent.
E) 100 percent.
Answer: A
13) A marginally attached worker
i) does not have a job and has not looked for one in the last month.
ii) is available and willing to work.
iii) must work at least 1 hour per week.
A) iii only.
B) ii only.
C) ii and iii.
D) i and ii.
E) i only.
Answer: D
14) Part-time workers are defined as people who are working
A) less than 20 hours per week.
B) between 20 and 35 hours per week.
C) less than 35 hours per week.
D) more than 10 hours per week.
E) fewer hours than they would want.
Answer: C
15) Julie works part-time for economic reasons. She would be considered
A) an involuntary part-time worker.
B) a discouraged worker.
C) a job seeker.
D) not in the labor force.
E) unemployed as calculated by the Bureau of Labor statistics.
Answer: A
16) Which of the following are sources of unemployment?
i. job losers.
ii. job leavers.
iii. entrants and reentrants.
iv. discouraged workers.
A) i and ii
B) i and iii
C) ii and iii
D) i, ii, and iii
E) i, ii, iii, and iv
Answer: D
17) Job losers are people who
A) voluntarily leave their jobs for other jobs.
B) are laid off either permanently or temporarily.
C) have just completed school and are entering the job market.
D) have their full-time hours cut to part-time hours.
E) leave the labor market because they believe they will be unable to find a job.
Answer: B
18) Job leavers are people who
A) are laid off.
B) leave a job voluntarily.
C) recently left school.
D) returned to the workplace after raising children.
E) are discouraged workers.
Answer: B
19) Pamella just graduated with a music degree and has been sending applications to symphony orchestras. Pamella is a
A) job market reentrant.
B) job market entrant.
C) job leaver.
D) not unemployed because she just graduated.
E) discouraged worker.
Answer: B
20) Josh quit his job to care for his young daughter. Now that she has entered school, Josh is looking for a job. Josh is a
A) job leaver.
B) job loser.
C) discouraged worker.
D) job market reentrant.
E) not unemployed because he quit his previous job.
Answer: D
21) Frictional unemployment is the result of
A) an economic recession.
B) the economic decline of major industries.
C) the normal process of jobs being created and destroyed.
D) people not getting along (having friction) with their employers.
E) changing weather throughout the year.
Answer: C
22) Mary has decided that the she does not like Iowa and has decided to quit her job as a medical technician and move to Arizona. Mary's unemployment as she searches for a new job is best classified as
A) cyclical.
B) seasonal.
C) structural.
D) frictional.
E) traveling.
Answer: D
23) Higher unemployment benefits create
A) incentives for longer job searches and higher frictional unemployment.
B) incentives for shorter job searches and higher structural unemployment.
C) higher seasonal unemployment as workers switch jobs.
D) a lower number of job leavers.
E) higher structural unemployment as firms are more likely to fire workers.
Answer: A
24) Structural unemployment includes people who become unemployed from
A) changes in the seasons.
B) normal changes in the labor force.
C) technological changes.
D) changes in the business cycle.
E) going back to school.
Answer: C
25) Joe has been unable to find a job because he lacks the necessary computer skills. Joe is
A) frictionally unemployed.
B) structurally unemployed.
C) seasonally unemployed.
D) cyclically unemployed.
E) skill-set unemployed.
Answer: B
26) Keith has just lost his job as a life guard at the beach when summer ended. Keith is
A) naturally unemployed.
B) structurally unemployed.
C) seasonally unemployed.
D) cyclically unemployed.
E) search unemployed.
Answer: C
27) Which type of unemployment is the consequence of downturns in the business cycle?
A) cyclical
B) seasonal
C) structural
D) frictional
E) natural
Answer: A
28) Full employment occurs when
A) structural unemployment is zero.
B) cyclical unemployment is zero.
C) frictional unemployment is zero.
D) structural, seasonal, and frictional unemployment are zero.
E) the unemployment rate equals zero.
Answer: B
29) Natural unemployment equals the sum of
A) cyclical and frictional unemployment.
B) cyclical, seasonal, and structural unemployment.
C) frictional, seasonal, and structural unemployment.
D) seasonal and cyclical unemployment.
E) cyclical, frictional, seasonal, and structural unemployment.
Answer: C
30) When cyclical unemployment is zero,
A) frictional unemployment is zero.
B) cyclical and frictional unemployment are zero.
C) structural unemployment is zero.
D) the unemployment rate equals the natural unemployment rate.
E) the natural unemployment rate is zero.
Answer: D
31) If the unemployment rate is less than the natural unemployment rate, then
A) there is no frictional unemployment.
B) cyclical unemployment is greater than zero.
C) real GDP is less than potential GDP.
D) real GDP is greater than potential GDP.
E) frictional unemployment is negative.
Answer: D
32) Potential GDP is the level of output produced when the unemployment rate is
A) equal to the natural unemployment rate.
B) greater than the natural unemployment rate.
C) less than the natural unemployment rate.
D) zero.
E) made up of only cyclical unemployment.
Answer: A
Essay questions :
1) Define the unemployment rate and labor-force participation rate. Discuss the differences between these two rates.
Answer: The unemployment rate is defined as × 100 and the labor force participation rate is defined as × 100. The two measures give different perspectives on the labor market. The labor force participation rate tells the percentage of the working-age population that is either working or is available for work. The unemployment rate tells the percentage of the people working or available for work (the labor force) who do not have jobs.
2) The unemployment rate is 6 percent. If the population is 300 million, and the number unemployed is 6 million and the number employed is 94 million, what is the size of the labor force?
Answer: The labor force is the sum of the number of employed people plus the number of unemployed people. Hence the labor force equals 94 million + 6 million = 100 million.
3) Suppose the current unemployment rate is 5 percent, the labor force is 400 million people, the labor force participation rate is 80 percent and the working-age population is 500 million people. What number of people are unemployed?
Answer: The number of unemployed people equals the labor force multiplied by the unemployment rate. Hence the number of unemployed people is (400 million) × (5 percent) = 20 million people.
4) Suppose that the population is 275 million. Also assume that the labor force is 135 million and that 130 million people are employed. Calculate the unemployment rate.
Answer: The unemployment rate is (5 million unemployed ÷ 135 million labor force) × 100 = 3.7 percent.
5) Suppose the population is 220 million people, the labor force is 150 million people, the number of people employed is 130 million and the working-age population is 175 million people. What is the unemployment rate?
Answer: The unemployment rate is (20 million unemployed ÷ 150 million labor force) × 100 = 13.3 percent.
6) Suppose the working-age population is 150 million, the labor force is 125 million, and employment is 120 million.
a. What is the unemployment rate?
b. Now suppose that 2 million students graduate from college and begin to look for jobs. What is the new unemployment rate if none of the students have found jobs yet?
c. Suppose that all 2 million students find jobs. What is the unemployment rate now?
Answer:
a. The unemployment rate is (5 million unemployed ÷ 125 million labor force) × 100 = 4.0 percent.
b. The unemployment rate is (7 million unemployed ÷ 127 million labor force) × 100 = 5.5 percent.
c. The unemployment rate is (5 million unemployed ÷ 127 million labor force) × 100 = 3.9 percent.
7) Suppose there are 180 million employed people and 20 million unemployed people.
a. What is the unemployment rate?
b. Suppose that 5 million unemployed people give up their search for jobs and become discouraged workers. What is the new unemployment rate?
Answer:
a. The unemployment rate is (20 million unemployed ÷ 200 million labor force) × 100 = 10.0 percent.
b. The unemployment rate is (15 million unemployed ÷ 195 million labor force) × 100 = 7.7 percent.
8) What are the four types of unemployment and how do they change over the business cycle?
Answer: The four types of unemployment are frictional, structural, seasonal, and cyclical. Of these four types, the first three—frictional, structural, and seasonal unemployment—have no strong relationship to the business cycle. The fourth type, cyclical unemployment, however is the result of the business cycle. When the economy is in a recession and people lose their jobs as a result of the recession, the unemployed workers are cyclically unemployed. Conversely, when the economy is an expansion, cyclical unemployment decreases. Hence, cyclical unemployment increases during a recession and decreases during an expansion.