20 Chapter Unemployment
MULTIPLE CHOICE
IDENTIFYING UNEMPLOYMENT
1. The Bureau of Labor Statistics is part of the U.S. Department of
a. the Treasury.
b. Commerce.
c. Labor.
d. the Interior.
ANS: C
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Bureau of Labor Statistics MSC: Definitional
2. Measuring unemployment is the job of the
a. Congressional Budget Office.
b. Department of Commerce.
c. Council of Economic Advisers.
d. Bureau of Labor Statistics.
ANS: D
PTS: 1
DIF: 1
NAT: Analytic LOC: Unemployment and inflation
MSC: Definitional
3. The Bureau of Labor Statistics produces data on
a. unemployment.
b. types of employment.
c. length of the average workweek.
d. All of the above are correct.
ANS: D
PTS: 1
DIF: 2
NAT: Analytic LOC: Unemployment and inflation
MSC: Interpretive
TOP:
REF: 20-1
Bureau of Labor Statistics
TOP:
REF: 20-1
Bureau of Labor Statistics
4. Unemployment data are collected
a. from unemployment insurance claims.
b. through a regular survey of about 60,000 households.
c. through a regular survey of about 200,000 firms.
d. using all of the above.
ANS: B
PTS: 1
DIF: 2
NAT: Analytic LOC: Unemployment and inflation
TOP:
MSC: Interpretive
REF: 20-1
Current population survey
5. The Bureau of Labor Statistics produces data on unemployment and other aspects of the labor market from a regu lar survey of households, called the
a. Census.
b. Labor Survey.
c. Survey of Economic Indicators.
d. Current Population Survey.
ANS: D
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Current population survey
MSC: Definitional
6. The Bureau of Labor Statistics produces data on unemployment
a. weekly.
b. monthly.
c. quarterly.
d. yearly.
63
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
64 Chapter 20/Unemployment
ANS: B
PTS: 1
DIF: 1
NAT: Analytic LOC: Unemployment and inflation
MSC: Definitional
TOP:
REF: 20-1
Current population survey
7. The Bureau of Labor Statistics produces data on unemployment and other aspects of the labor market from a regu lar survey of about
a. 600 households.
b. 6,000 households.
c. 60,000 households.
d. 6,000,000 households.
ANS: C
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Current population survey
MSC: Definitional
8. Unemployment numbers reported by the Bureau of Labor Statistics are reported based on a
a. monthly survey of about 60,000 households
b. monthly survey of about 6,000 households
c. weekly survey of about 60,000 households
d. weekly survey of about 6,000 households
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Current population survey
MSC: Definitional
9. Which of the following is not one of the categories into which the Bureau of Labor Statistics places each adult of
each surveyed household?
a. employed
b. unemployed
c. underemployed
d. not in the labor force
ANS: C
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Adult population
MSC: Definitional
10. The Bureau of Labor Statistics counts a member of a surveyed household as an adult if that person is at least
a. 14 years old.
b. 16 years old.
c. 18 years old.
d. 21 years old.
ANS: B
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Bureau of Labor Statistics MSC: Definitional
11. Which of the following is correct?
a. The BLS uses data collected from those applying for unemployment insurance to compute the
unemployment rate.
b. The labor force includes all adults who are able to work.
c. Unpaid homemakers are counted as employed by the BLS.
d. People working part time are counted as employed by the BLS.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment
MSC: Definitional
12. Who of the following is not included in the Bureau of Labor Statistics' employed category?
a. those who worked in their own business
b. those who worked as unpaid workers in a family member's business
c. those waiting to be recalled to a job from which they had been laid off
d. those who were temporarily absent from work because of vacation.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Employment
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 65
13. The Bureau of Labor Statistics places people in the employed category if they
a. are without a job, but are available for work and have tried to find a job during the previous 4
weeks.
b. work without pay in a family members business.
c. are waiting to be recalled to a job from which they had been laid off.
d. All of the above are correct.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Employment
MSC: Interpretive
14. The Bureau of Labor Statistics places people in the employed category if they
a. are temporarily absent from their jobs.
b. are self-employed.
c. work without pay in a family members business.
d. All of the above are correct.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Employment
MSC: Interpretive
15. To be counted as employed in the U.S. labor force statistics a person
a. must be working for pay and be working full time.
b. must be working for pay, but does not have to be working full time.
c. does not have to be working for pay if they are working for a family business, but must be
employed full time.
d. does not have to be working for pay if they are working for a family business and does not have to
be working full time
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment
MSC: Definitional
16. Who in the adult population is counted as employed in U.S. labor statistics?
a. people who are temporarily absent from their job and people who work without pay in a family
members business
b. people who are temporarily absent from their job but not people who work without pay in a family
members business
c. people who work without pay in a family members business but not people who are temporarily
absent from their job
d. neither people who are temporarily absent from their job nor people who work without pay in a
family members business
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment
MSC: Definitional
17. Who of the following are included in the Bureau of Labor Statistics employed category?
a. certain unpaid workers
b. part-time workers
c. workers on vacation
d. All of the above are correct.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Employment
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
66 Chapter 20/Unemployment
18. Mary worked part-time for her mothers business without pay. Larry was absent from work because he had the flu.
Who is counted as employed by the BLS?
a. Mary but not Larry
b. Larry but not Mary
c. both Marry and Larry
d. neither Mary nor Larry
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment
MSC: Interpretive
19. Edgar is working part-time. Diane is on temporary layoff. Who is included in the Bureau of Labor Statistics em ployed category?
a. only Edgar
b. only Diane
c. both Edgar and Diane
d. neither Edgar nor Diane
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Employment
MSC: Interpretive
20. Andre owns his own business. Oscar is an unpaid worker in his familys business. Who is included in the Bureau
of Labor Statistics employed category?
a. only Andre
b. only Oscar
c. both Andre and Oscar
d. neither Andre nor Oscar
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Employment
MSC: Interpretive
21. For the Bureau of Labor Statistics to place someone in the unemployed category, that person must
a. be available for work.
b. have tried to find employment during the previous week.
c. have previously been employed.
d. All of the above are correct.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Interpretive
22. For the Bureau of Labor Statistics to place someone in the unemployed category, that person must
a. have worked no more than 10 hours during the past week..
b. have tried to find employment during the previous year.
c. not have been laid off.
d. None of the above is correct.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Interpretive
23. Which of the following includes everyone in the adult population that the Bureau of Labor Statistics counts as unemployed?
a. anyone who is not employed
b. anyone who is not employed, is available for work, and has looked for work in the past 4 weeks
c. anyone who is not employed, is available for work, has looked for work in the past 4 weeks, and
anyone who is waiting to be recalled from a job from which they have been laid off
d. anyone who is not employed, is available for work, has looked for work in the past 4 weeks, anyone
who is waiting to be recalled from a job from which they have been laid off, and anyone who is
employed part time and has searched for full time employment in the past 4 weeks
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 67
24. Who of the following is counted as unemployed by the BLS?
a. someone working without pay for a family members business
b. someone who is absent from their job due to illness
c. someone on temporary layoff
d. All of the above are correct.
ANS: C
PTS: 1
DIF: 2
REF:
NAT: Analytic
LOC: Unemployment and inflation
TOP:
MSC: Definitional
20-1
Unemployment
25. Who of the following would be included in the Bureau of Labor Statistics unemployed category?
a. Julie, who is on temporary layoff
b. Andrew, who worked only 15 hours last week
c. Ellen, who neither has a job nor is looking for one
d. None of the above is correct.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Interpretive
26. Who of the following would be included in the Bureau of Labor Statistics unemployed category?
a. Cambry, a full-time student who is not looking for work
b. Eric, who is on temporary layoff
c. Carson, who has retired and is not looking for work
d. All of the above are correct.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Interpretive
27. Who of the following would necessarily be included in the Bureau of Labor Statistics unemployed category?
a. Lisa, who did not work during the previous 4 weeks
b. Julie, who tried to find new employment during the previous 4 weeks
c. Robert, who was an unpaid worker during the previous 4 weeks
d. None of the above is correct.
ANS: D
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Analytical
28. Matt is waiting to be recalled to a job from which he was laid off. David was fired but hasnt looked for work dur ing the last two months. Who does the BLS count as unemployed?
a. Matt but not David
b. David but not Matt
c. both David and Matt
d. neither David nor Matt
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Interpretive
29. Meredith recently graduated from college but has not yet started working. To be counted as unemployed she
a. does not have to have looked for work.
b. must have looked for work no more than a week ago.
c. must have looked for work no more than 4 weeks ago.
d. must have looked for work no more than 12 weeks ago.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Unemployment
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
68 Chapter 20/Unemployment
30. Tom was laid off and is expecting to be recalled. He has not looked for work since being laid off. Bill is not em ployed and not laid off. Who is counted as unemployed in the U.S. labor force statistics?
a. Tom and Bill even if he has not looked for work during the previous 4 weeks.
b. Tom and Bill if he has looked for work during the previous 4 weeks.
c. Not Tom. Bill even if he has not looked for work during the previous 4 weeks.
d. Not Tom. Bill if he has looked for work during the previous 4 weeks.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Definitional
31. A person who is counted as unemployed by the Bureau of Labor Statistics
a. is also in the labor force.
b. must have recently looked for work or be on temporary layoff.
c. must be at least 16 years old.
d. All of the above are correct.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Unemployment | Labor force
MSC: Interpretive
32. Caitlin is an unpaid worker in her familys bakery. The Bureau of Labor Statistics counts Caitlin as
a. unemployed and in the labor force.
b. unemployed and not in the labor force.
c. employed and in the labor force.
d. employed and not in the labor force.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Employment | Labor force
MSC: Interpretive
33. Jason works part-time as a babysitter. The Bureau of Labor Statistics counts Jason as
a. unemployed and in the labor force.
b. unemployed and not in the labor force.
c. employed and in the labor force.
d. employed and not in the labor force.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Employment | Labor force
MSC: Interpretive
34. Danielle did not work last week because flooding forced an evacuation of her workplace. The Bureau of Labor
Statistics counts Danielle as
a. unemployed and in the labor force.
b. unemployed and not in the labor force.
c. employed and in the labor force.
d. employed and not in the labor force.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Employment | Labor force
MSC: Interpretive
35. Ava owns her own business. The Bureau of Labor Statistics counts Ava as
a. unemployed and in the labor force.
b. unemployed and not in the labor force.
c. employed and in the labor force.
d. employed and not in the labor force.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Employment | Labor force
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 69
36. Mario was laid off two months ago. He has not searched for other work because he is expecting to be recalled to
work. In the U.S. labor force statistics Mario is counted as
a. unemployed and in the labor force.
b. unemployed and not in the labor force.
c. employed and in the labor force.
d. not in the labor force.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Unemployment | Labor force
MSC: Definitional
37. Jouke is on a temporary layoff from his factory job but has not looked for work in the last four weeks. The Bureau
of Labor Statistics counts Jouke as
a. unemployed and in the labor force.
b. unemployed and not in the labor force.
c. employed and in the labor force.
d. employed and not in the labor force.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Unemployment | Labor force
MSC: Interpretive
38. Jai Li just lost her job, and she hasnt yet started looking for a new one. The Bureau of Labor Statistics counts Jai
Li as
a. unemployed and in the labor force.
b. unemployed, but not in the labor force.
c. in the labor force, but not unemployed.
d. neither in the labor force nor unemployed.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Unemployment | Labor force
MSC: Interpretive
39. Josh is a full-time college student who is not working or looking for a job. The Bureau of Labor Statistics counts
Josh as
a. unemployed and in the labor force.
b. unemployed, but not in the labor force.
c. in the labor force, but not unemployed.
d. neither in the labor force nor unemployed.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Unemployment | Labor force
MSC: Interpretive
40. Angelica is an unpaid homemaker who works as a volunteer at the local Red Cross and is currently not looking for
a paid job. The Bureau of Labor Statistics counts Angelica as
a. unemployed and in the labor force.
b. unemployed, but not in the labor force.
c. in the labor force, but not unemployed.
d. neither in the labor force nor unemployed.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Unemployment | Labor force
MSC: Interpretive
41. Jill does not currently have a job, but has applied for several jobs in the previous week. Ken is an unpaid stay-athome dad who has not searched for work in recent years. Who does the BLS count as out of the labor force?
a. Jill but not Ken
b. Ken but not Jill
c. Jill and Ken
d. neither Jill nor Ken
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
70 Chapter 20/Unemployment
42. Who is included in the labor force by the Bureau of Labor Statistics?
a. Chris, an unpaid homemaker not looking for other work
b. Marcus, a full-time student not looking for work
c. Gabe, who does not have a job, but is looking for work
d. None of the above is correct.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Interpretive
43. Who is included in the labor force by the Bureau of Labor Statistics?
a. Juan, who works most of the week in a steel factory
b. Molly, who is on temporary layoff
c. Charlie, who does not have a job, but is looking for work
d. All of the above are included in the labor force.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Interpretive
44. Who is not included in the labor force by the Bureau of Labor Statistics?
a. Calvin, who is on temporary layoff
b. Michael, who has retired and is not looking for work
c. Lauren, who does not have a job, but has applied for several in the last week
d. None of the above is correct.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Interpretive
45. Shannon is a full-time homemaker not currently searching for paid work. Noah is a full-time student who is not
looking for a job. Who is included in the labor force by the Bureau of Labor Statistics?
a. only Shannon
b. only Noah
c. both Shannon and Noah
d. neither Shannon nor Noah
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Interpretive
46. Which of the following 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.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate | Labor force MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 71
Sample Population
Person
Allen
Ben
Allison
Brittany
Cathy
Calvin
Diane
David
Evelyn
Eli
Flora
Frank
Status
Unpaid stay at home dad. Has not looked for a job in several years.
College president.
Part-time welder. Actively looking for full time work.
Self-employed full-time wedding singer.
Full-time physicians assistant.
Retired finance professor. Last applied for work 10 weeks ago.
Laid-off fork-lift operator expecting to be recalled.
Works for a bicycle store. Age 70.
Manager of health food store.
Museum guard. Was not at work last week due to illness.
Has never been employed. Looked for a job last week.
Fired from job as an investment banker. Last looked for work three weeks ago.
47. Refer to Sample Population. How many in the sample are unemployed?
a. 5
b. 4
c. 3
d. None of the above is correct.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Applicative
48. Refer to Sample Population. How many in the sample are in the labor force?
a. 10
b. 9
c. 8
d. None of the above is correct.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force
MSC: Applicative
49. The labor-force participation rate measures the percentage of the
a. total adult population that is in the labor force.
b. total adult population that is employed.
c. labor force that is employed.
d. labor force that is either employed or unemployed.
ANS: A
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate
MSC: Definitional
50. The labor-force participation rate tells us the fraction of the population that
a. is able to participate in the labor market.
b. has ever been employed.
c. has chosen to participate in the labor market.
d. has chosen not to participate in the labor market.
ANS: C
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate
MSC: Definitional
51. The Bureau of Labor Statistics defines the unemployment rate as the percentage of
a. those unemployed relative to those employed.
b. the labor force that is unemployed.
c. the adult population that is unemployed.
d. the adult population that is unemployed or not in the labor force.
ANS: B
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
72 Chapter 20/Unemployment
52. The labor force equals the
a. number of people employed.
b. number of people employed plus the number of people unemployed.
c. number of people employed plus the number of people unemployed plus teenagers between ages 14
and 16 who work at least 10 hours a week.
d. adult population.
ANS: B
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Definitional
53. Suppose there are a large number of men who used to work or seek work who now no longer do either. Other
things the same, this makes
a. the number of people unemployed rise but does not change the labor force.
b. the number of people unemployed rise but makes the labor force fall.
c. both the number of people unemployed and the labor force fall.
d. the number of people unemployed fall but does not change the labor force.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Unemployment | Labor force
MSC: Interpretive
54. The unemployment rate is computed as the number of unemployed
a. divided by the labor force, all times 100.
b. divided by the number of employed, all times 100.
c. divided by the adult population, all times 100.
d. times the labor-force participation rate, all times 100.
ANS: A
PTS: 1
DIF: 1
REF:
NAT: Analytic
LOC: Unemployment and inflation
TOP:
MSC: Definitional
20-1
Unemployment rate
55. The labor-force participation rate is computed as
a. (Employed Adult Population) 100.
b. (Employed Labor Force) 100.
c. (Labor Force Adult Population) 100.
d. (Adult Population Labor Force) 100.
ANS: C
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate
MSC: Definitional
56. Satchel loses his job and immediately begins looking for another. Other things the same, the unemployment rate
a. increases and the labor-force participation rate decreases.
b. and the labor-force participation rate both increase.
c. increases and the labor-force participation rate is unaffected.
d. is unaffected and the labor-force participation rate decreases.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate | Labor-force participation rate MSC: Interpretive
57. Matilda just graduated from college. In order to devote all her efforts to college, she didnt hold a job. She is go ing to tour around the country on her motorcycle for a month before she starts looking for work. Other things the
same, the unemployment rate
a. increases and the labor-force participation rate decreases.
b. and the labor-force participation rate both increase.
c. increases and the labor-force participation rate is unaffected.
d. and the labor-force participation rate are both unaffected.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate | Labor-force participation rate MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 73
58. Sheamous loses his job and decides to sit on the beach rather than look for work during the next few months. Oth er things the same, 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 decreases.
d. and the labor-force participation rate are both unaffected.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate | Labor-force participation rate MSC: Interpretive
59. Sirius has just finished high school and started looking for his first job, but has not yet found one. Other things the
same, the unemployment rate
a. and the labor-force participation rate both increase.
b. increases and the labor-force participation rate is unaffected.
c. is unaffected and the labor-force participation rate increases.
d. and the labor-force participation rate are both unaffected.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate | Labor-force participation rate MSC: Interpretive
60. If an unemployed person quits looking for work, then, eventually the unemployment rate
a. decreases and the labor-force participation rate is unaffected.
b. and the labor-force participation rate both decrease.
c. is unaffected and the labor-force participation rate decreases.
d. and the labor-force participation rate are both unaffected.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate | Labor-force participation rate MSC: Interpretive
61. President Bigego is running for re-election against Senator Pander. Bigego proclaims that more people are work ing now than when he took office. Pander says that the unemployment rate is higher now than when Bigego took
office. You conclude that
a. one of them must be lying.
b. both of them could be telling the truth if the labor force and employment grew at the exact same
rate.
c. both of them could be telling the truth if the labor force grew slower than employment.
d. both of them could be telling the truth if the labor force grew faster than employment.
ANS: D
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment | Unemployment rate MSC: Analytical
62. In June 2009 the BLS reported an adult population of 234.9 million, a labor force of 154 million and employment
of 141.6 million. Based on these numbers the unemployment rate was
a. 93.3/234.9.
b. 12.4/234.9.
c. 93.3/154.
d. 12.4/154.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate
MSC: Applicative
63. In June 2009 the BLS reported an adult population of 234.9 million, unemployment of 12.4 million, and employment of 141.6 million. Based on these numbers the labor-force participation rate was
a. 154/234.9.
b. 141.6/234.9.
c. 141.6/154.
d. None of the above are correct.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force participation rate
MSC: Applicative
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
74 Chapter 20/Unemployment
64. In June 2009 the BLS reported a U.S. foreign-born population of 35.3 million. Of these, 22.7 million were em ployed and 1.4 million were unemployed. Based on these numbers what were the unemployment rate and the
labor-force participation rate of the foreign-born U.S. population?
a. 1.4/35.3 and 22.7/35.3
b. 1.4/35.3 and 24.1/35.3
c. 1.4/24.1 and 22.7/24.1
d. None of the above are correct.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force participation rate | Labor-force participation rate
MSC: Applicative
65. In 2009, based on concepts similar to those used to estimate U.S. employment figures, the Japanese adult non-insti tutionalized population was 110.272 million, the labor force was 65.362 million, and the number of people em ployed was 62.242 million. According to these numbers, the Japanese labor-force participation rate and unemploy ment rate were about
a. 56.4% and 2.8%.
b. 56.4% and 4.8%.
c. 59.3% and 2.8%.
d. 59.3% and 4.8%.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force participation rate | Unemployment rate MSC: Applicative
66. In 2009, based on concepts similar to those used to estimate U.S. employment figures, the Italian adult non-institu tionalized population was 51.070 million, the labor force was 24.710 million, and the number of people employed
was 22.765 million. According to these numbers, the Italian labor-force participation rate and unemployment rate
were about
a. 48.4% and 7.9%.
b. 48.4% and 3.8%.
c. 44.6% and 7.9%
d. 44.6% and 3.8%
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force participation rate | Unemployment rate MSC: Applicative
67. In 2009, based on concepts similar to those used to estimate U.S. employment figures, the Swedish adult non-insti tutionalized population was 7.568 million, the labor force was 4.888 million, and the number of people employed
was 4.486 million. According to these numbers, the Swedish labor-force participation rate and unemployment rate
were about
a. 64.6% and 8.2%.
b. 64.6% and 5.3%.
c. 59.3% and 8.2%.
d. 59.3% and 5.3%.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force participation rate | Unemployment rate MSC: Applicative
68. The Bureau of Labor Statistics reported in 2005 that there were 53.23 million people over age 25 who had at least a
bachelors degree, 40.59 million of whom were employed and 0.98 million of whom were unemployed. What
were the labor-force participation rate and the unemployment rate for this group?
a. 76.3% and 1.8%
b. 76.3% and 2.4%
c. 78.1% and 1.8%
d. 78.1% and 2.4%
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force participation rate | Unemployment rate MSC: Applicative
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 75
69. The Bureau of Labor Statistics reported in 2005 that there were 50.40 million people over age 25 whose highest
level of education was some college or an associate degree, 33.86 million of whom were employed and 1.27 mil lion of whom were unemployed. What were the labor-force participation rate and the unemployment rate for this
group?
a. 69.7% and 2.5%
b. 69.7% and 3.6%
c. 67.2% and 2.5%
d. 67.2% and 3.6%
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force participation rate | Unemployment rate MSC: Applicative
70. The Bureau of Labor Statistics reported in 2005 that there were 59.98 million people over age 25 whose highest
level of education was a high school degree or equivalent, 36.40 million of whom were employed and 1.93 million
of whom were unemployed. What were the labor-force participation rate and the unemployment rate for this
group?
a. 60.7% and 3.2%
b. 60.7% and 5.0%
c. 63.9% and 3.2%
d. 63.9% and 5.0%
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force participation rate | Unemployment rate MSC: Applicative
71. The Bureau of Labor Statistics reported in 2005 that there were 28.19 million people over age 25 who had no high
school degree or its equivalent, 11.73 million of whom were employed and 1.04 million of whom were unemployed. What were the labor-force participation rate and the unemployment rate for this group?
a. 45.3% and 3.7%
b. 45.3% and 8.1%
c. 41.6% and 3.7%
d. 41.6% and 8.1%
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force participation rate | Unemployment rate MSC: Applicative
72. Suppose that the adult population is 4 million, the number of unemployed is 0.25 million, and the labor-force parti cipation rate is 75%. What is the unemployment rate?
a. 6.25%
b. 8.3%
c. 9.1%
d. 18.75%
ANS: B
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate
MSC: Analytical
73. Suppose that the adult population is 6 million, the number of employed is 3.8 million, and the labor-force particip ation rate is 70%. What is the unemployment rate?
a. 6.7%
b. 9.5%
c. 10.5%
d. 28%
ANS: B
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate
MSC: Analytical
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
76 Chapter 20/Unemployment
74. Suppose some country had an adult population of about 50 million, a labor-force participation rate of 60 percent,
and an unemployment rate of 5 percent. How many people were employed?
a. 1.5 million
b. 28.5 million
c. 30 million
d. 47.5 million
ANS: B
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment
MSC: Analytical
75. Suppose some country had an adult population of about 50 million, a labor-force participation rate of 60 percent,
and an unemployment rate of 5 percent. How many people were unemployed?
a. 1.425 million
b. 1.5 million
c. 2.5 million
d. 5 million
ANS: B
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Analytical
76. Suppose some country had an adult population of about 25 million, a labor-force participation rate of 60 percent,
and an unemployment rate of 6 percent. How many people were employed?
a. 0.9 million
b. 14.1 million
c. 15 million
d. 23.5 million
ANS: B
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Employment
MSC: Analytical
77. Suppose some country had an adult population of about 25 million, a labor-force participation rate of 60 percent,
and an unemployment rate of 6 percent. How many people were unemployed?
a. 0.846 million
b. 0.9 million
c. 1.5 million
d. 6 million
ANS: B
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Analytical
78. Suppose some country had an adult population of about 46 million, a labor-force participation rate of 75 percent,
and an unemployment rate of 8 percent. How many people were employed?
a. 2.76 million
b. 31.74 million
c. 34.5 million
d. 42.32 million
ANS: B
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Employment
MSC: Analytical
79. Suppose some country had an adult population of about 46 million, a labor-force participation rate of 75 percent,
and an unemployment rate of 8 percent. How many people were unemployed?
a. 2.54 million
b. 2.76 million
c. 3.68 million
d. 8 million
ANS: B
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Analytical
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 77
Table 20-1
Labor Data for Aridia
Year
Adult population
Number of employed
Number of unemployed
2010
2000
1400
200
2011
3000
1300
600
2012
3200
1600
200
80. Refer to Table 20-1. The labor force of Aridia in 2010 was
a. 1400.
b. 1600.
c. 1800.
d. 2000.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Applicative
81. Refer to Table 20-1. The labor force of Aridia in 2011 was
a. 1300.
b. 1900.
c. 2400.
d. 3000.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Applicative
82. Refer to Table 20-1. The labor force of Aridia in 2012 was
a. 1600.
b. 1800.
c. 3000.
d. 3200.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Applicative
83. Refer to Table 20-1. The labor force of Aridia
a. increased from 2010 to 2011 and increased from 2011 to 2012.
b. increased from 2010 to 2011 and decreased from 2011 to 2012.
c. decreased from 2010 to 2011 and increased from 2011 to 2012.
d. decreased from 2010 to 2011 and decreased from 2011 to 2012.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Applicative
84. Refer to Table 20-1. The number of adults not in the labor force of Aridia in 2010 was
a. 200.
b. 400.
c. 600.
d. 1800.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Applicative
85. Refer to Table 20-1. The number of adults not in the labor force of Aridia in 2011 was
a. 600.
b. 1100.
c. 1700.
d. 2400.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Applicative
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
78 Chapter 20/Unemployment
86. Refer to Table 20-1. The number of adults not in the labor force of Aridia in 2012 was
a. 200.
b. 1400.
c. 1600.
d. 3000.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Applicative
87. Refer to Table 20-1. The number of adults not in the labor force of Aridia
a. increased from 2010 to 2011 and increased from 2011 to 2012.
b. increased from 2010 to 2011 and decreased from 2011 to 2012.
c. decreased from 2010 to 2011 and increased from 2011 to 2012.
d. decreased from 2010 to 2011 and decreased from 2011 to 2012.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Applicative
88. Refer to Table 20-1. The unemployment rate of Aridia in 2010 was
a. 10%.
b. 12.5%.
c. 14.3%.
d. 80%.
ANS: B
PTS: 1
DIF: 2
REF:
NAT: Analytic
LOC: Unemployment and inflation
TOP:
MSC: Applicative
89. Refer to Table 20-1. The unemployment rate of Aridia in 2011 was
a. 20%.
b. 31.6%.
c. 46.2%.
d. 63.3%.
ANS: B
PTS: 1
DIF: 2
REF:
NAT: Analytic
LOC: Unemployment and inflation
TOP:
MSC: Applicative
90. Refer to Table 20-1. The unemployment rate of Aridia in 2012 was
a. 6.25%.
b. 11.1%.
c. 12.5%.
d. 56.25%.
ANS: B
PTS: 1
DIF: 2
REF:
NAT: Analytic
LOC: Unemployment and inflation
TOP:
MSC: Applicative
91. Refer to Table 20-1. The unemployment rate of Aridia
a. increased from 2010 to 2011 and increased from 2011 to 2012.
b. increased from 2010 to 2011 and decreased from 2011 to 2012.
c. decreased from 2010 to 2011 and increased from 2011 to 2012.
d. decreased from 2010 to 2011 and decreased from 2011 to 2012.
ANS: B
PTS: 1
DIF: 2
REF:
NAT: Analytic
LOC: Unemployment and inflation
TOP:
MSC: Applicative
20-1
Unemployment rate
20-1
Unemployment rate
20-1
Unemployment rate
20-1
Unemployment rate
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 79
92. Refer to Table 20-1. The labor-force participation rate of Aridia in 2010 was
a. 70%.
b. 77.8%.
c. 80%.
d. 87.5%.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate
MSC: Applicative
93. Refer to Table 20-1. The labor-force participation rate of Aridia in 2011 was
a. 43.3%.
b. 54.2%.
c. 63.3%.
d. 68.4%.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate
MSC: Applicative
94. Refer to Table 20-1. The labor-force participation rate of Aridia in 2012 was
a. 50%.
b. 53.3%.
c. 56.25%.
d. 88.9%.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate
MSC: Applicative
95. Refer to Table 20-1. The labor-force participation rate of Aridia
a. increased from 2010 to 2011 and increased from 2011 to 2012.
b. increased from 2010 to 2011 and decreased from 2011 to 2012.
c. decreased from 2010 to 2011 and increased from 2011 to 2012.
d. decreased from 2010 to 2011 and decreased from 2011 to 2012.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate
MSC: Applicative
Table 20-2
2009 Labor Data for Baltivia
Number of adults
Number of adults who are paid employees
Number of adults who work in their own businesses
Number of adults who are unpaid workers in a family members business
Number of adults who were temporarily absent from their jobs because of an earthquake
Number of adults who were waiting to be recalled to a job from which they had been laid off
Number of adults who do not have a job, are available for work, and have tried to find a job
within the past four weeks
Number of adults who do not have a job, are available for work, but have not tried to find a job
within the past four weeks
Number of adults who are full-time students
Number of adults who are homemakers or retirees
20,000
8,000
1,600
1,000
400
200
1,400
780
3,000
3,620
96. Refer to Table 20-2. How many people were employed in Baltivia in 2009?
a. 9,600
b. 10,600
c. 11,000
d. 11,200
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Employment
MSC: Applicative
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
80 Chapter 20/Unemployment
97. Refer to Table 20-2. How many people were unemployed in Baltivia in 2009?
a. 1,400
b. 1,600
c. 2,000
d. 2,780
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Applicative
98. Refer to Table 20-2. How many people were in Baltivias labor force in 2009?
a. 11,000
b. 12,600
c. 13,380
d. 20,000
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Applicative
99. Refer to Table 20-2. How many adults were not in Baltivias labor force in 2009?
a. 4,400
b. 6,620
c. 7,400
d. 8,690
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Applicative
100. Refer to Table 20-2. What was Baltivias unemployment rate in 2009?
a. 8.0 percent
b. 12.7 percent
c. 15.9 percent
d. 22.1 percent
ANS: B
PTS: 1
DIF: 2
REF:
NAT: Analytic
LOC: Unemployment and inflation
TOP:
MSC: Applicative
20-1
Unemployment rate
101. Refer to Table 20-2. What was Baltivias labor-force participation rate in 2009?
a. 55 percent
b. 63 percent
c. 66.9 percent
d. 87.3 percent
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate
MSC: Applicative
102. According to 2009 data on the U.S. population which of the following was correct for people ages 20 and over?
a. Blacks had higher rates of labor-force participation and lower rates of unemployment compared to
whites.
b. Blacks had higher rates of labor-force participation and higher rates of unemployment compared to
whites.
c. Blacks had similar rates of labor-force participation and lower rates of unemployment compared to
whites.
d. Blacks had similar rates of labor-force participation and higher rates of unemployment compared to
whites.
ANS: D
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 81
103. According to 2009 data on the U.S. population which of the following was correct?
a. Adults had higher labor-force participation rates and higher rates of unemployment compared to
teenagers.
b. Adults had higher labor-force participation rates and lower rates of unemployment compared to
teenagers.
c. Adults had lower labor-force participation rates and lower rates of unemployment compared to
teenagers.
d. Adults had lower labor-force participation rates and higher rates of unemployment compared to
teenagers.
ANS: B
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Definitional
104. According to 2009 data on the U.S. population, which of the following groups of adults (ages 20 and older) had the
highest labor-force participation rate?
a. white males
b. white females
c. black males
d. black females
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force demographics MSC: Interpretive
105. According to 2009 data on the U.S. population, which of the following groups of adults (ages 20 and older) had the
lowest labor-force participation rate?
a. white males
b. white females
c. black males
d. black females
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force demographics MSC: Interpretive
106. According to 2009 data on the U.S. population, which of the following groups of adults (ages 20 and older) had the
highest unemployment rate?
a. white males
b. white females
c. black males
d. black females
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Interpretive
107. According to 2009 data on the U.S. population, which of the following groups of adults (ages 20 and older) had the
lowest unemployment rate?
a. white males
b. white females
c. black males
d. black females
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
82 Chapter 20/Unemployment
108. According to 2009 data on the U.S. population, which of the following groups of teenagers (ages 16-19) had the
highest labor-force participation rate?
a. white males
b. white females
c. black males
d. black females
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force demographics MSC: Interpretive
109. According to 2009 data on the U.S. population, which of the following groups of teenagers (ages 16-19) had the
lowest labor-force participation rate?
a. white males
b. white females
c. black males
d. black females
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force demographics MSC: Interpretive
110. According to 2009 data on the U.S. population, which of the following groups of teenagers (ages 16-19) had the
highest unemployment rate?
a. white males
b. white females
c. black males
d. black females
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Interpretive
111. According to 2009 data on the U.S. population, which of the following groups of teenagers (ages 16-19) had the
lowest unemployment rate?
a. white males
b. white females
c. black males
d. black females
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Interpretive
112. In order, which group has the highest participation rate and which has the higher unemployment rate?
a. black males, black males
b. black males, white males
c. white males, black males
d. white males, white males
ANS: C
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Definitional
113. Which of the following is correct?
a. The labor-force participation rate of women has increased in part due to smaller families.
b. The labor-force participation rate of men has decreased in part due to men retiring younger and
living longer.
c. Both a and b are correct.
d. None of the above is correct.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Analytical
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 83
Table 20-3
2010 Labor Data for Adults (age 16 and older) in Meditor
Males not in labor force
45 million
Females not in labor force
35 million
Males unemployed
5 million
Females unemployed
5 million
Males employed
85 million
Females employed
65 million
114. Refer to Table 20-3. What is the adult population in Meditor?
a. 90 million
b. 160 million
c. 230 million
d. 240 million
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Adult population
MSC: Applicative
115. Refer to Table 20-3. What is the adult labor force in Meditor?
a. 90 million
b. 150 million
c. 160 million
d. 230 million
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Applicative
116. Refer to Table 20-3. What is the adult unemployment rate in Meditor?
a. 4.2 percent
b. 6.25 percent
c. 6.7 percent
d. 10 percent
ANS: B
PTS: 1
DIF: 2
REF:
NAT: Analytic
LOC: Unemployment and inflation
TOP:
MSC: Applicative
20-1
Unemployment rate
117. Refer to Table 20-3. What is the adult labor-force participation rate in Meditor?
a. 37.5 percent
b. 62.5 percent
c. 66.7 percent
d. 95.8 percent
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate
MSC: Applicative
118. Refer to Table 20-3. What is the adult male population in Meditor?
a. 50 million
b. 90 million
c. 130 million
d. 135 million
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Adult population
MSC: Applicative
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
84 Chapter 20/Unemployment
119. Refer to Table 20-3. What is the adult male labor force in Meditor?
a. 50 million
b. 85 million
c. 90 million
d. 130 million
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Applicative
120. Refer to Table 20-3. What is the adult male unemployment rate in Meditor?
a. 3.7 percent
b. 5 percent
c. 5.6 percent
d. 5.9 percent
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate
MSC: Applicative
121. Refer to Table 20-3. What is the adult male labor-force participation rate in Meditor?
a. 37 percent
b. 63 percent
c. 66.7 percent
d. 96.3 percent
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate
MSC: Applicative
122. Refer to Table 20-3. What is the adult female population in Meditor?
a. 40 million
b. 70 million
c. 100 million
d. 105 million
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Adult population
MSC: Applicative
123. Refer to Table 20-3. What is the adult female labor force in Meditor?
a. 40 million
b. 65 million
c. 70 million
d. 100 million
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor force
MSC: Applicative
124. Refer to Table 20-3. What is the adult female unemployment rate in Meditor?
a. 4.8 percent
b. 5 percent
c. 7.1 percent
d. 7.7 percent
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate
MSC: Applicative
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 85
125. Refer to Table 20-3. What is the adult female labor-force participation rate in Meditor?
a. 38.1 percent
b. 61.9 percent
c. 66.7 percent
d. 95.2 percent
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate
MSC: Applicative
Labor Force Statistics by Age.
Suppose people in the adult population in a small country are classified based on their age.
Labor Force Status
less then 55
55 and older
Number employed
400,000
100,000
Number unemployed
25,000
7,000
Number in Population
600,000
200,000
126.
Refer to Labor Force Statistics by Age. In the proper order, which age group has the highest unemployment rate and which has the highest participation rate?
a. under 55, under 55
b. under 55, 55 and older
c. 55 and older, under 55
d. 55 and older, 55 and older
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate | Labor-force participation rate MSC: Applicative
127. Refer to Labor Force Statistics by Age. Suppose that the natural rate of unemployment is 5% for those under 55
and 3% for those 55 and older. The cyclical unemployment rate for those under 55 is
a. .88% which is greater than the cyclical unemployment rate for those 55 and older.
b. .88% which is less than the cyclical unemployment rate for those 55 and older.
c. -.83% which is greater than the cyclical unemployment rate for those 55 and older.
d. -.83% which is less than the cyclical unemployment rate for those 55 and older.
ANS: B
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Cyclical unemployment | Natural rate of unemployment
MSC: Analytical
128. Data on the unemployment rate in the U.S. since 1960 show that the unemployment rate is
a. always zero.
b. sometimes zero.
c. rarely zero.
d. never zero.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate facts
MSC: Interpretive
129. The deviation of unemployment from its natural rate is called
a. the normal rate of unemployment.
b. deviant unemployment.
c. cyclical unemployment.
d. fluctuating unemployment.
ANS: C
PTS: 1
DIF: 1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Definitional
REF:
20-1
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
86 Chapter 20/Unemployment
130. If the natural rate of unemployment is 5.2 percent and the actual rate of unemployment is 5.7 percent, then by
definition there is
a. cyclical unemployment amounting to 0.5 percent of the labor force.
b. frictional unemployment amounting to 0.5 percent of the labor force.
c. structural unemployment amounting to 0.5 percent of the labor force.
d. search unemployment amounting to 0.5 percent of the labor force.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Cyclical unemployment
MSC: Interpretive
131. Economists at the Congressional Budget Office estimated that for 2009, the U.S. natural rate of unemployment was
a. 2.5 percent.
b. 3.0 percent.
c. 5.0 percent.
d. 6.5 percent.
ANS: C
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Definitional
132. Since 1960, the natural rate of unemployment in the U.S. has been between
a. 0.4 and 0.6 percent.
b. 4 and 6 percent.
c. 6 and 12 percent.
d. 12 and 24 percent.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Interpretive
133. Which of the following is correct?
a. In the U.S. the natural rate of unemployment is frequently near 2%.
b. The natural rate of unemployment fluctuates more than the cyclical rate of unemployment.
c. The cyclical rate of unemployment is sometimes below the natural rate of unemployment.
d. None of the above is correct.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Cyclical unemployment | Natural rate of unemployment
MSC: Interpretive
134. Which list contains two periods when the U.S. unemployment rate was below the natural rate of unemployment?
a. 1965-1968, 1981-1984
b. 1965-1968, 1997-2000
c. 1981-1984, 1991-1994
d. 1991-1994, 1997-2000
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate
MSC: Interpretive
135. Which of the following is a cause of the changing role of women in American society over the past several dec ades?
a. new technologies that have reduced the amount of time required to complete routine household
tasks
b. improved birth control
c. changing political and social attitudes
d. All of the above are correct.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate by gender
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 87
136. Just after World War II, the labor-force participation rate of women was
a. about 25 percent, and in 2009, it was about 50 percent.
b. about 33 percent, and in 2009 it was about 60 percent.
c. about 50 percent, and in 2009, it was about 70 percent.
d. about 60 percent, and in 2009, it was about 80 percent.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate by gender
MSC: Interpretive
137. Over the past several decades, the difference between the labor-force participation rates of men and women in the
U.S. has
a. gradually increased.
b. remained constant.
c. gradually decreased.
d. been eliminated.
ANS: C
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate by gender
MSC: Definitional
138. Over the past several decades in the United States, the labor-force participation rate of women has
a. increased and the labor-force participation rate of men has increased.
b. increased and the labor-force participation rate of men has decreased.
c. decreased and the labor-force participation rate of men has increased.
d. decreased and the labor-force participation rate of men has decreased.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate by gender
MSC: Interpretive
139. Which of the following is not a cause of the decline in the U.S. mens labor-force participation rate over the past
several decades?
a. young men now stay in school longer than their fathers and grandfathers did
b. older men now retire earlier and live longer
c. with more women employed, there are fewer jobs now available to men
d. more fathers now stay at home to raise their children
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate by gender
MSC: Interpretive
140. Just after World War II, the labor-force participation rate of men was
a. about 33 percent, and in 2009, it was about 50 percent.
b. about 50 percent, and in 2009, it was about 60 percent.
c. about 65 percent, and in 2009, it was about 60 percent.
d. about 87 percent, and in 2009, it was about 72 percent.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Labor-force participation rate by gender
MSC: Interpretive
141. Recent entrants into the labor force account for about
a. 1/5 of those who are unemployed.
b. 1/4 of those who are unemployed.
c. 1/3 of those who are unemployed.
d. 1/2 of those who are unemployed.
ANS: C
PTS: 1
DIF: 1
NAT: Analytic
LOC: Unemployment and inflation
MSC: Definitional
REF:
TOP:
20-1
Unemployment spells
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
88 Chapter 20/Unemployment
142. Spells of unemployment end about
a. 1/5 of the time with the person leaving the labor force.
b. 1/4 of the time with the person leaving the labor force.
c. 1/3 of the time with the person leaving the labor force.
d. 1/2 of the time with the person leaving the labor force.
ANS: D
PTS: 1
DIF: 1
NAT: Analytic
LOC: Unemployment and inflation
MSC: Definitional
REF:
TOP:
20-1
Unemployment spells
143. A person who is not employed and claims to be trying hard to find a job but really is not trying hard to find a job
a. is counted as out of the labor force but should be counted as unemployed.
b. is counted as unemployed but should be counted as out of the labor force.
c. is correctly counted as out of the labor force.
d. is correctly counted as unemployed.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Interpretive
144. Suppose that some people are counted as unemployed when, to maintain unemployment compensation, they search
for work only at places where they are unlikely to be hired. If these individuals were counted as out of the labor
force instead of as unemployed, then
a. both the unemployment rate and labor-force participation rate would be higher.
b. both the unemployment rate and labor-force participation rate would be lower.
c. the unemployment rate would be lower and the labor-force participation rate would be higher.
d. the unemployment rate would be higher and the participation rate would be lower.
ANS: B
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Analytical
145. Suppose that some people report themselves as unemployed when, in fact, they are working in the underground
economy. If these persons were counted as employed, then
a. both the unemployment rate and labor-force participation rate would be higher.
b. both the unemployment rate and labor-force participation rate would be lower.
c. the unemployment rate would be higher and the labor-force participation rate would be higher.
d. the unemployment rate would be lower and the labor-force participation rate would be unaffected.
ANS: D
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Analytical
146. Some people who are employed or who are not making serious effort to find employment will report themselves as
unemployed. Some people who want to find work will be counted as out of the labor force.
a. Both the first and the second fact tend to make the reported unemployment rate lower than
otherwise.
b. Both the first and the second fact tend to make the reported unemployment rate higher than
otherwise.
c. The first fact tends to make the reported unemployment rate higher than otherwise, while the
second fact tends to make the reported unemployment rate lower than otherwise.
d. The first fact tends to make the reported unemployment rate lower than otherwise, while the second
fact tends to make the reported unemployment rate higher than otherwise.
ANS: C
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Analytical
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 89
147. Some persons are counted as out of the labor force because they have made no serious or recent effort to look for
work. However, some of these individuals may want to work even though they are too discouraged to make a seri ous effort to look for work. If these individuals were counted as unemployed instead of out of the labor force, then
a. both the unemployment rate and labor-force participation rate would be higher.
b. the unemployment rate would be higher and the labor-force participation rate would be lower.
c. the unemployment rate would be lower and the labor-force participation rate would be higher.
d. both the unemployment rate and labor-force participation rate would be lower.
ANS: A
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Analytical
148. The BLS counts discouraged workers as
a. employed. Including them as employed makes the unemployment rate lower than otherwise.
b. unemployed. Including them as unemployed makes the unemployment rate higher than otherwise.
c. out of the labor force. If the were counted as unemployed the unemployment rate would be higher.
d. None of the above is correct.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Discouraged workers
MSC: Interpretive
149. The BLS classifies people who would like to work but have given up looking for a job as
a. unemployed. If they were classified as out of the labor force, the reported unemployment rate
would be larger.
b. unemployed. If they were classified as out of the labor force, the reported unemployment rate
would be smaller.
c. out of the labor force. If they were classified as unemployed, the reported unemployment rate
would be larger.
d. out of the labor force. If they were classified as unemployed, the reported unemployment rate
would be smaller.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Discouraged workers
MSC: Interpretive
150. Some individuals would like to have a job, but they have given up looking for a job after an unsuccessful search.
These individuals are called
a. detached workers, and they are classified by the Bureau of Labor Statistics as unemployed.
b. detached workers, and they are not classified by the Bureau of Labor Statistics as unemployed.
c. discouraged workers, and they are classified by the Bureau of Labor Statistics as unemployed.
d. discouraged workers, and they are not classified by the Bureau of Labor Statistics as unemployed.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Discouraged workers
MSC: Interpretive
151. Who would be included in the labor force?
a. Homer, who is waiting for his new job to start
b. Michelle, who has become discouraged looking for a job and has quit looking
c. Derrick, an unpaid homemaker
d. None of the above would be included in the labor force.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Discouraged workers
MSC: Interpretive
152. The reported unemployment rate should be viewed as
a. a useful but imperfect measure of joblessness.
b. clearly smaller than the true unemployment rate.
c. clearly larger than the true unemployment rate.
d. being very close to the true unemployment rate.
ANS: A
PTS: 1
DIF: 1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
REF:
MSC:
20-1
Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
90 Chapter 20/Unemployment
153. Marginally attached workers are people who
a. are looking for a better job than they currently have.
b. are not working and are not looking for work, but would work if asked.
c. are working part-time while they go to school or get training for a better job.
d. are only a few years from retirement.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Marginally attached workers
MSC: Interpretive
154. Consider two people who are currently out of work. Tim is not looking for work because there have been many
job cuts where he lives and he doesn't think it likely that he will find work. Bev is not currently looking for work,
but she would like a job and she has looked for work in the past. The Bureau of Labor Statistics considers
a. both Tim and Bev to be marginally attached workers.
b. neither Tim nor Bev to be marginally attached workers.
c. only Tim to be a marginally attached worker.
d. only Bev to be a marginally attached worker.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Marginally attached workers
MSC: Interpretive
155. The BLS reports the U-6 measure of labor underutilization. Which of the following is how it computes U-6?
a. (total unemployed + marginally attached workers)/adult population
b. (total unemployed + marginally attached workers + part-time employed for economic
reasons)/adult population
c. (total unemployed + marginally attached workers)/(labor force + marginally attached workers)
d. (total unemployed + marginally attached workers + part time employed for economic reasons)/
(labor force + marginally attached workers)
ANS: D
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Underutilization
MSC: Definitional
Table 20-4
Civilian labor force
Persons unemployed 15 weeks or longer
Job losers and persons who have completed temporary jobs (excludes job leavers)
Total unemployed
Total unemployed plus discouraged workers
Total unemployed plus all marginally attached workers
Total unemployed plus all marginally attached workers plus total employed part-time for
economic reasons
100 million
1.6 million
3.1 million
6.2 million
7.0 million
8.1 million
9.2 million
156. Refer to Table 20-4. What is the U-1 measure of labor underutilization?
a. 1.6 percent
b. 3.1 percent
c. 6.2 percent
d. 7.0 percent
ANS: A
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Underutilization
MSC: Analytical
157. Refer to Table 20-4. What is the U-2 measure of labor underutilization?
a. 1.5 percent
b. 3.1 percent
c. 4.7 percent
d. 6.2 percent
ANS: B
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Underutilization
MSC: Analytical
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 91
158. Refer to Table 20-4. What is the U-3 measure of labor underutilization?
a. 4.7 percent
b. 6.2 percent
c. 7.0 percent
d. 10.9 percent
ANS: B
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Underutilization
MSC: Analytical
159. Refer to Table 20-4. What is the U-4 measure of labor underutilization?
a. 6.5 percent
b. 6.9 percent
c. 7.0 percent
d. 17.9 percent
ANS: B
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Underutilization
MSC: Analytical
160. Refer to Table 20-4. What is the U-5 measure of labor underutilization?
a. 7.5 percent
b. 7.9 percent
c. 8.1 percent
d. 26 percent
ANS: B
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Underutilization
MSC: Analytical
161. Refer to Table 20-4. What is the U-6 measure of labor underutilization?
a. 8.4 percent
b. 9.0 percent
c. 9.2 percent
d. 35.2 percent
ANS: B
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Underutilization
MSC: Analytical
162. Most spells of unemployment are
a. long, and most unemployment observed at any given time is long term.
b. long, but most unemployment observed at any given time is short term.
c. short, but most unemployment observed at any given time is long term.
d. short, and most unemployment observed at any given time is short term.
ANS: C
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment spells
MSC: Definitional
163. If you were told that someone you knew nothing else about had just become unemployed, your best guess would
be
a. that they would be unemployed for a long time, and that most of the unemployed theyve joined
have been unemployed for a long time.
b. that they would be unemployed for a long time, even though most of the unemployed theyve
joined have been unemployed for a short time.
c. that they would be unemployed for a short time, even though most of the unemployed theyve
joined have been unemployed for a long time.
d. that they will be unemployed for a short time, and that most of the unemployed theyve joined have
been unemployed for a short time.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment spells
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
92 Chapter 20/Unemployment
164. Which of the following is correct?
a. typically more than one third of the unemployed are new entrants into the job market.
b. most spells of unemployment are short.
c. most unemployment observed at any time is long term.
d. All of the above are correct.
ANS: D
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment spells
MSC: Definitional
165. In one year, you meet 52 people who are each unemployed for one week and eight people who are each unemployed for the whole year. What percentage of the unemployment spells you encountered was short-term, and
what percentage of the unemployment you encountered in a given week was long-term?
a. 52 percent and 13.3 percent
b. 52 percent and 88.9 percent
c. 86.7 percent and 13.3 percent
d. 86.7 percent and 88.9 percent
ANS: D
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment spells
MSC: Analytical
166. A survey showed that in each of the past 12 months there was one person who was unemployed who worked in all
other months. There were also two people who were unemployed for all 12 months. What percentage of the unem ployment spells during the year was short-term, and what percentage of the unemployment in a given month was
long-term?
a. 75 percent and 33.3 percent
b. 75 percent and 66.7 percent
c. 85.7 percent and 33.3 percent
d. 85.7 percent and 66.7 percent
ANS: D
PTS: 1
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment spells
MSC: Analytical
167. Evidence indicates that the typical person who becomes unemployed will
a. soon find a job.
b. find a job, but not before a year or more has gone by.
c. leave the labor force and never return.
d. retire soon after
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment spells
MSC: Interpretive
168. Which of the following is not correct?
a. Most people who become unemployed will soon find jobs.
b. In an ideal labor market, wages would adjust to ensure that all workers are always fully employed.
c. The unemployment rate occasionally falls to zero.
d. There are always some workers without jobs, even when the overall economy is doing well.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment spells | Natural rate of unemployment MSC: Interpretive
169. Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and
skills is called
a. the natural rate of unemployment.
b. cyclical unemployment.
c. structural unemployment.
d. frictional unemployment.
ANS: D
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 93
170. Unemployment that results because the number of jobs available in some labor markets may be insufficient to give
a job to everyone who wants one is called
a. the natural rate of unemployment.
b. cyclical unemployment.
c. structural unemployment.
d. frictional unemployment.
ANS: C
PTS: 1
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Definitional
171. People who are unemployed because of job search are best classified as
a. cyclically unemployed.
b. structurally unemployed.
c. frictionally unemployed.
d. discouraged workers.
ANS: C
PTS: 1
DIF: 2
REF:
NAT: Analytic
LOC: Unemployment and inflation
TOP:
MSC: Interpretive
20-1
Frictional unemployment
172. Which of the following is not an explanation for the existence of unemployment in the long run?
a. it takes time for workers to search for the jobs that are best suited for them
b. minimum-wage laws
c. unions
d. the business cycle
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Structural unemployment MSC: Interpretive
173. Which of the following is an explanation for the existence of frictional unemployment?
a. efficiency wages
b. minimum-wage laws
c. unions
d. job search
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Interpretive
174. Frictional unemployment results from
a. job searching. It is often thought to explain relatively short spells of unemployment.
b. job searching. It is often thought to explain relatively long spells of unemployment
c. a surplus in the some labor markets. It is often thought to explain relatively short spells of
unemployment.
d. a surplus in some labor markets. It is often thought to explain relatively long spells of
unemployment.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Definitional
175. Which of the following is not an explanation for the existence of structural unemployment?
a. efficiency wages
b. job search
c. minimum-wage laws
d. unions
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
94 Chapter 20/Unemployment
176. Frictional unemployment is thought to explain
a. relatively short spells of unemployment, as is structural unemployment.
b. relatively long spells of unemployment, as is structural unemployment.
c. relatively short spells of unemployment, while structural unemployment is thought to explain
relatively long spells of unemployment.
d. relatively long spells of unemployment, while structural unemployment is thought to explain
relatively short spells of unemployment.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Structural unemployment MSC: Interpretive
177. People who are unemployed because wages are, for some reason, set above the level that brings labor supply and
demand into equilibrium are best classified as
a. cyclically unemployed.
b. structurally unemployed.
c. frictionally unemployed.
d. discouraged workers.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Structural unemployment MSC: Interpretive
178. John is a stockbroker. He has had several job offers, but he has turned them down because he thinks he can find a
firm that better matches his tastes and skills. Curtis has looked for work as an accountant for some time. While
the demand for accountants doesnt appear to be falling, there seems to be more people applying than jobs avail able.
a. John and Curtis are both frictionally unemployed.
b. John and Curtis are both structurally unemployed.
c. John is frictionally unemployed, and Curtis is structurally unemployed.
d. John is structurally unemployed, and Curtis is frictionally unemployed.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Structural unemployment MSC: Interpretive
179. Meredith is looking for work as a computer programmer. Although her prospects are good, she hasn't yet taken a
job. Julie is looking for work in a steel mill. Every time she shows up for an interview, there are more people
looking for work than their are openings. Someone waiting in line with her tells her it has been that way for a long
time.
a. Meredith and Julie are both frictionally unemployed.
b. Meredith and Julie are both structurally unemployed.
c. Meredith is frictionally unemployed, and Julie is structurally unemployed.
d. Meredith is structurally unemployed, and Julie is frictionally unemployed.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Structural unemployment MSC: Interpretive
180. Jenna is searching for a job that suits her tastes about where to live. Mary is looking for a job that makes best use
of her skills.
a. Jenna and Mary are both frictionally unemployed.
b. Jenna and Mary are both structurally unemployed.
c. Jenna is frictionally unemployed, and Mary is structurally unemployed.
d. Jenna is structurally unemployed, and Mary is frictionally unemployed.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Structural unemployment MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 95
181. Bob is looking for work after school, but everywhere he fills out an application, the managers say they always have
a lot more applications than open positions. Tom has a law degree. Several firms have made him offers, but he
thinks he might be able to find a firm where his talents could be put to better use.
a. Bob and Tom are both frictionally unemployed.
b. Bob and Tom are both structurally unemployed.
c. Bob is frictionally unemployed, and Tom is structurally unemployed.
d. Bob is structurally unemployed, and Tom is frictionally unemployed.
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Structural unemployment MSC: Interpretive
182. Adam is looking for a job in marketing. He has had some offers and his prospects are promising but hes not yet
accepted a job. Amanda lost her job working for Mercury Bicycles because many customers decided they prefer
bicycles manufactured by Ultimate Bicycles instead. Who is frictionally unemployed?
a. Adam but not Amanda
b. Amanda but not Adam
c. Adam and Amanda
d. neither Amanda nor Adam
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Structural unemployment MSC: Interpretive
183. Sandy has graduated from college and is devoting her time to searching for a job. She has seen plenty of openings,
but has not yet been offered one that best suits her tastes and skills. Sandy is
a. structurally unemployed. Structural unemployment exists even in the long run.
b. structurally unemployed. There is no structural unemployment in the long run.
c. frictionally unemployed. Frictional unemployment exists even in the long run.
d. frictionally unemployed. There is no frictional unemployment in the long run.
ANS: C
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Structural unemployment MSC: Interpretive
184. Teenagers have more frequent unemployment spells so on average they spend more time searching for jobs. Other
thing the same this means that teenagers have a
a. higher unemployment rate. If a larger portion of the adult population were teenaged, the natural
rate of unemployment would be higher.
b. higher unemployment rate. The portion of the adult population that is teenaged does not affect the
natural rate of unemployment.
c. lower unemployment rate. If a larger portion of the adult population were teenaged, the natural
rate of unemployment would be lower.
d. lower unemployment rate. The portion of the adult population that is teenaged does not affect the
natural rate of unemployment.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment | Frictional unemployment
MSC: Interpretive
185. 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.
ANS: A
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment | Frictional unemployment | Structural unemployment
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
96 Chapter 20/Unemployment
186. Cyclical unemployment is caused by
a. frictional and structural unemployment
b. frictional but not structural unemployment
c. structural but not frictional unemployment
d. neither frictional nor structural unemployment
ANS: D
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Cyclical unemployment | Frictional unemployment | Structural unemployment
MSC: Definitional
187. Every month, the Bureau of Labor Statistics surveys 160,000 business establishments to help determine
a. the number of people unemployed.
b. the number of jobs the economy has gained or lost.
c. the size of the labor force.
d. the number of people who own their own businesses.
ANS: B
PTS: 1
DIF: 2
REF: 20-1
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Employment from establishment survey
MSC: Interpretive
UNEMPLOYMENT - JOB SEARCH
1. Job search
a. is one reason economies always experience some unemployment.
b. is the process of matching workers with appropriate jobs.
c. would not be a problem if all workers and all jobs were the same.
d. All of the above are correct.
ANS: D
PTS: 1
DIF: 2
REF:
NAT: Analytic
LOC: Unemployment and inflation
TOP:
MSC: Interpretive
20-2
Frictional unemployment
2. If all workers and all jobs were the same such that all workers were equally well suited for all jobs, then there
would be no
a. cyclical unemployment.
b. frictional unemployment.
c. natural rate of unemployment.
d. structural unemployment.
ANS: B
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Interpretive
3. Sectoral shifts in demand for output
a. create structural unemployment.
b. immediately reduce unemployment.
c. increase unemployment due to job search.
d. do not affect demand for labor.
ANS: C
PTS: 1
DIF: 2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Sectoral shifts
MSC:
REF:
20-2
Interpretive
4. From time to time, the demand for workers has risen in one region of the United States and fallen in another. This
illustrates
a. frictional unemployment created by efficiency wages.
b. structural unemployment created by efficiency wages.
c. frictional unemployment created by sectoral shifts.
d. structural unemployment created by sectoral shifts.
ANS: C
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Sectoral shifts
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 97
5. Consumers decide to ride bikes more and drive cars less. Bicycle companies expand production while automobile
companies fire workers. This is an example of
a. frictional unemployment created by sectoral shifts.
b. frictional unemployment created by efficiency wages.
c. structural unemployment created by efficiency wages.
d. structural unemployment created by sectoral shifts.
ANS: A
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Sectoral shifts
MSC: Interpretive
6. Suppose that because of the popularity of the low-carb diet, bakeries need fewer workers and steak houses need
more workers. The unemployment created by this change is
a. frictional unemployment created by efficiency wages.
b. frictional unemployment created by sectoral shifts.
c. structural unemployment created by efficiency wages.
d. structural unemployment created by sectoral shifts.
ANS: B
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Sectoral shifts
MSC: Interpretive
7. Suppose the demand for construction workers increased and the demands for textile and steel workers diminished.
This is an example of
a. frictional unemployment created by efficiency wages.
b. structural unemployment created by efficiency wages.
c. frictional unemployment created by sectoral shifts.
d. structural unemployment created by sectoral shifts.
ANS: C
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Sectoral shifts
MSC: Interpretive
8. Suppose that consumers choose to smoke less and chew gum more. Tobacco companies cut back on the number of
people they employ while chewing gum manufacturers employ more. This is an example of
a. structural unemployment created by efficiency wages.
b. structural unemployment created by sectoral shifts.
c. frictional unemployment created by efficiency wages.
d. frictional unemployment created by sectoral shifts.
ANS: D
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Sectoral shifts
MSC: Interpretive
9. The invention of the telegraph led to the loss of jobs for those who had delivered mail by horse, but created jobs
for telegraph operators and delivery persons. This is an example of
a. structural unemployment created by efficiency wages.
b. structural unemployment created by sectoral shifts.
c. frictional unemployment created by efficiency wages.
d. frictional unemployment created by sectoral shifts.
ANS: D
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Sectoral shifts
MSC: Interpretive
10. The Bureau of Labor Statistics predicts that the number of jobs for dental hygienists will grow faster than most oc cupations while the number of jobs for bookbinders will decline. This change in the labor market could lead to
a. frictional unemployment created by efficiency wages.
b. structural unemployment created by efficiency wages.
c. frictional unemployment created by sectoral shifts.
d. structural unemployment created by sectoral shifts.
ANS: C
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Sectoral shifts
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
98 Chapter 20/Unemployment
11. Frictional unemployment is inevitable because
a. sectoral shifts are always happening.
b. there is a federal minimum-wage law in the U.S.
c. some people do not want to be employed.
d. unions are very popular in the U.S.
ANS: A
PTS: 1
DIF: 2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Sectoral shifts
MSC:
REF:
20-2
Interpretive
12. Which of the following was not among the four industries with the largest employment in the United States a century ago?
a. cotton goods
b. mens clothing
c. meat packing
d. lumber
ANS: C
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Sectoral shifts
MSC: Interpretive
13. Which of the following is not among the four industries with the largest employment in the United States today?
a. lumber
b. aircraft
c. communications
d. electrical components
ANS: A
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: The study of economics and definitions in economics
TOP: Sectoral shifts
MSC: Interpretive
14. About what percentage of jobs are destroyed every year and about what percentage of workers leave their jobs in a
typical month?
a. 1% and 5%
b. 5% and 1%
c. 3% and 10%
d. 10% and 3%
ANS: D
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Job churning facts
MSC: Interpretive
15. Which of the following is not correct?
a. Frictional unemployment is inevitable in a dynamic economy.
b. Although the unemployment created by sectoral shifts is unfortunate, in the long run such changes
lead to higher productivity and higher living standards.
c. At least 10 percent of U.S. manufacturing jobs are destroyed every year.
d. More than 13 percent of U.S. workers leave their jobs in a typical month.
ANS: D
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Interpretive
16. Which of the following is a source of frictional unemployment?
a. changes in the composition of demand among industries or regions
b. minimum wages
c. labor unions
d. None of the above is correct.
ANS: A
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Sectoral shifts
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 99
17. Frictional unemployment can be the consequence of
a. workers leaving existing jobs to find ones they like better.
b. one industry declining while another is growing.
c. changes in the working conditions offered by competing firms.
d. All of the above are correct.
ANS: D
PTS: 1
DIF: 2
REF:
NAT: Analytic
LOC: Unemployment and inflation
TOP:
MSC: Interpretive
20-2
Frictional unemployment
18. Public policy
a. can reduce both frictional unemployment and the natural rate of unemployment.
b. can reduce frictional unemployment, but it cannot reduce the natural rate of unemployment.
c. cannot reduce frictional unemployment, but it can reduce the natural rate of unemployment.
d. cannot reduce either frictional unemployment or the natural rate of unemployment.
ANS: A
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Public policy | Frictional unemployment | Natural rate of unemployment
MSC: Interpretive
19. Policies that reduce the time it takes unemployed workers to find new jobs
a. can reduce both frictional unemployment and the natural rate of unemployment.
b. can reduce frictional unemployment, but it cannot reduce the natural rate of unemployment.
c. cannot reduce frictional unemployment, but it can reduce the natural rate of unemployment.
d. cannot reduce either frictional unemployment or the natural rate of unemployment.
ANS: A
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Public policy | Frictional unemployment | Natural rate of unemployment
MSC: Interpretive
20. Which of the following does not help reduce frictional unemployment?
a. government-run employment agencies
b. public training programs
c. unemployment insurance
d. All of the above help reduce frictional unemployment.
ANS: C
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Public policy | Frictional unemployment
MSC: Interpretive
21. Providing training for unemployed individuals is primarily intended to reduce
a. frictional unemployment.
b. seasonal unemployment.
c. structural unemployment.
d. cyclical unemployment.
ANS: A
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Public policy | Frictional unemployment
MSC: Interpretive
22. Government-run employment agencies and public training programs are operated by the government to try to facil itate job search and reduce unemployment.
a. Almost all economists agree that such programs are of no use.
b. Almost all economists agree that such programs work very well.
c. Some economists claim that the government can do these things no better than firms and
individuals could do them for themselves.
d. Some economists claim that these programs increase frictional unemployment.
ANS: C
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Public policy | Unemployment
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
100 Chapter 20/Unemployment
23. Of the following groups, who is eligible for unemployment insurance benefits?
a. the unemployed who quit their jobs
b. the unemployed who were laid off because their previous employers no longer needed their skills
c. the unemployed who were fired for cause
d. the unemployed who just entered the labor force
ANS: B
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Interpretive
24. Arnold quit his job because he was unhappy at work. Michael was fired because he frequently came to work late.
Who is eligible for unemployment insurance benefits?
a. both Arnold and Michael
b. Arnold but not Michael
c. Michael but not Arnold
d. neither Arnold nor Michael
ANS: D
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Interpretive
25. A typical American worker covered by unemployment insurance receives
a. 50 percent of his former wages for 26 weeks.
b. 50 percent of his former wages for 52 weeks.
c. 100 percent of his former wages for 26 weeks.
d. 100 percent of his former wages for 52 weeks.
ANS: A
PTS: 1
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Definitional
26. Unemployment insurance
a. reduces search effort which raises unemployment.
b. reduces search effort which lowers unemployment.
c. increases search effort which raises unemployment.
d. increases search effort which decreases unemployment.
ANS: A
PTS: 1
DIF: 2
NAT: Analytic
LOC: Unemployment and inflation
MSC: Interpretive
REF:
TOP:
20-2
Unemployment insurance
27. Evidence from research studies by economists
a. shows that increased unemployment benefits decrease the job search efforts of the unemployed.
b. shows that increased unemployment benefits have virtually no effect on the job search efforts of the
unemployed.
c. shows that increased unemployment benefits increase the job search efforts of the unemployed.
d. is conflicting on what increased unemployment benefits do to the job search efforts of the
unemployed.
ANS: A
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Interpretive
28. More generous unemployment insurance would
a. raise structural unemployment.
b. raise frictional unemployment.
c. lower structural unemployment.
d. lower frictional unemployment.
ANS: B
PTS: 1
DIF: 2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance | Frictional unemployment MSC:
REF:
20-2
Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 101
29. Economists would predict that, other things the same, the more generous unemployment compensation a country
has,
a. the shorter the duration of each spell of unemployment, and the higher the unemployment rate.
b. the shorter the duration of each spell of unemployment, and the lower the unemployment rate.
c. the longer the duration of each spell of unemployment, and the higher the unemployment rate.
d. the longer the duration of each spell of unemployment, and the lower the unemployment rate.
ANS: C
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Interpretive
30. Unemployment insurance
a. reduces the hardship of unemployment, but it also increases the amount of unemployment.
b. reduces the incentive for the unemployed to find and take new jobs.
c. causes workers to be less likely to seek guarantees of job security when they negotiate with
employers over the terms of employment.
d. All of the above are correct.
ANS: D
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance | Incentives
MSC: Interpretive
31. Unemployment insurance
a. may improve the ability of the economy to match workers with appropriate jobs.
b. reduces the job search efforts of the unemployed.
c. increases the amount of frictional unemployment in the economy.
d. All of the above are correct.
ANS: D
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Interpretive
32. In the 1990s Ireland made unemployment benefits less generous. This change would likely have
a. reduced structural unemployment and the natural rate of unemployment
b. reduced structural unemployment but not the natural rate of unemployment
c. reduced frictional unemployment and the natural rate of unemployment
d. reduced frictional unemployment but not the natural rate of unemployment
ANS: C
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Applicative
33. Which of the following is correct?
a. Unemployment insurance raises structural unemployment because it reduces the job search efforts
of the unemployed.
b. Most economists are skeptical of the value of unemployment insurance primarily because they
believe that it results in a poorer match between workers and jobs.
c. Studies show that when the unemployed become ineligible for benefits, the probability of their
finding a job rises markedly.
d. All of the above are correct.
ANS: C
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Interpretive
34. Frictional unemployment is
a. not inevitable; rather, it can be reduced to zero by well-designed public policies.
b. not inevitable; rather, it could be reduced to zero if by the elimination of unemployment insurance.
c. inevitable, because at any given time, jobs are being created in some firms and destroyed in other
firms.
d. inevitable, because in some industries, wages are always set above the level that brings supply and
demand into equilibrium.
ANS: C
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
102 Chapter 20/Unemployment
35. An economist claims that changes in information technology and unemployment insurance have reduced unem ployment. Which of these changes affect frictional unemployment?
a. both the changes in information technology and unemployment insurance
b. only the changes in information technology
c. only the changes in unemployment insurance
d. neither the changes in information technology nor the changes in unemployment insurance
ANS: A
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Unemployment insurance MSC: Interpretive
36. Which of the following is not a cause of frictional unemployment?
a. the destruction of manufacturing jobs
b. a worker leaving a job to find one with better benefits
c. minimum-wage laws
d. unemployment insurance
ANS: C
PTS: 1
DIF: 2
REF:
NAT: Analytic
LOC: Unemployment and inflation
TOP:
MSC: Interpretive
20-2
Frictional unemployment
37. Which of the following is not correct?
a. The unemployment rate is an imperfect measure of a nations overall level of economic well-being.
b. Most job search in the U.S. economy takes place without intervention by the government.
c. Most economists agree that eliminating unemployment insurance would increase the nations
overall level of well-being.
d. Other things the same, countries that offer more generous and longer-lasting unemployment
insurance benefits are likely to have higher unemployment rates.
ANS: C
PTS: 1
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance | Economic well-being
MSC: Interpretive
MINIMUM-WAGE LAWS
1. Which of the following is not correct?
a. Frictional unemployment results from the process of matching workers and jobs.
b. Structural unemployment results when the number of jobs is insufficient for the number of workers.
c. Minimum wages are the predominant reason for unemployment in the U.S. economy.
d. When a minimum-wage law forces the wage to remain above the level that balances supply and
demand, it raises the quantity of labor supplied and reduces the quantity of labor demanded
compared to the equilibrium level.
ANS: C
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Minimum wage
MSC: Interpretive
2. Minimum wages create unemployment in markets where they create a
a. shortage of labor. Unemployment of this type is called frictional.
b. shortage of labor. Unemployment of this type is called structural.
c. surplus of labor. Unemployment of this type is called frictional.
d. surplus of labor. Unemployment of this type is called structural.
ANS: D
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Minimum wage
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 103
3. Minimum wages create unemployment in markets where they create a
a. shortage of labor. Minimum wage laws are not the predominant reason for unemployment in the
U.S.
b. shortage of labor. Minimum wage laws are the predominant reason for unemployment in the U.S.
c. surplus of labor. Minimum wage laws are not the predominant reason for unemployment in the
U.S.
d. surplus of labor. Minimum wage laws are the predominant reason for unemployment in the U.S.
ANS: C
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Minimum wage | Structural unemployment
MSC: Definitional
4. When a minimum-wage law forces the wage to remain above the level that balances supply and demand, it
a. raises the quantity of labor supplied and raises the quantity of labor demanded compared to the
equilibrium level.
b. raises the quantity of labor supplied and reduces the quantity of labor demanded compared to the
equilibrium level.
c. reduces the quantity of labor supplied and raises the quantity of labor demanded compared to the
equilibrium level.
d. reduces the quantity of labor supplied and reduces the quantity of labor demanded compared to the
equilibrium level.
ANS: B
PTS: 1
DIF: 1
REF: 20-3
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage
MSC: Definitional
5. When a minimum-wage law forces the wage to remain above the level that balances supply and demand, the result
is a
a. shortage of labor and a shortage of jobs.
b. shortage of labor and a surplus of jobs.
c. surplus of labor and a shortage of jobs.
d. surplus of labor and a surplus of jobs.
ANS: C
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage
MSC: Interpretive
6. Minimum-wage laws can keep wages
a. above equilibrium and cause a surplus of labor.
b. above equilibrium and cause a shortage of labor.
c. below equilibrium and cause a surplus of labor.
d. below equilibrium and cause a shortage of labor.
ANS: A
PTS: 1
DIF: 2
NAT: Analytic
LOC: Labor markets
MSC: Interpretive
REF:
TOP:
20-3
Minimum wage
7. An increase in the minimum wage
a. increases both the quantity demanded and the quantity supplied of labor.
b. decreases both the quantity demanded and the quantity supplied of labor.
c. increases the quantity of labor demanded but decreases the quantity of labor supplied.
d. decreases the quantity of labor demanded but increases the quantity of labor supplied.
ANS: D
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage
MSC: Interpretive
8. An increase in the minimum wage
a. reduces structural unemployment.
b. reduces frictional unemployment,
c. increases structural unemployment.
d. increases fricitional unemployment.
ANS: C
PTS: 1
DIF:
NAT: Analytic
LOC: Labor markets
MSC: Interpretive
2
REF:
TOP:
20-3
Minimum wage
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
104 Chapter 20/Unemployment
9. If the minimum wage is currently above the equilibrium wage, then a decrease in the minimum wage
a. increases both the quantity demanded and the quantity supplied of labor.
b. decreases both the quantity demanded and the quantity supplied of labor.
c. increases the quantity of labor demanded but decreases the quantity of labor supplied.
d. decreases the quantity of labor demanded but increases the quantity of labor supplied.
ANS: C
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage
MSC: Interpretive
10. If the minimum wage were currently above the equilibrium wage, then a decrease in the minimum wage that kept it
above the equilibrium wage would
a. increase the surplus of labor.
b. reduce the surplus of labor.
c. increase the shortage of labor.
d. reduce the shortage of labor,
ANS: B
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage
MSC: Interpretive
Labor Market Data
Below is some hypothetical data on the labor market.
wage
quantity demanded
quantity supplied
$7
9,000
14,000
$6
12,000
12,000
$5
15,000
10,000
11. Refer to Labor Market Data. If the government imposed a minimum wage of $5, what would unemployment be?
a. 0
b. 2,000
c. 3,000
d. 5,000
ANS: A
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage
MSC: Applicative
12. Refer to Labor Market Data. If the government imposed a minimum wage of $7, what would unemployment
be?
a. 0
b. 2,000
c. 3,000
d. 5,000
ANS: D
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage
MSC: Applicative
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 105
Figure 20-1
10
wage
S
9
8
7
6
5
4
3
D
2
1
10
20
30
40
50
60
70
80
90
hundreds
of workers
13. Refer to Figure 20-1. At the equilibrium wage, how many workers are unemployed?
a. 0
b. 4000
c. 5000
d. 8000
ANS: A
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Applicative
14. Refer to Figure 20-1. At the equilibrium wage, how many workers are employed?
a. 0
b. 1000
c. 5000
d. 9000
ANS: C
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment
MSC: Applicative
15. Refer to Figure 20-1. If the government imposes a minimum wage of $4, then how many workers will be unem ployed?
a. 0
b. 3000
c. 4000
d. 7000
ANS: A
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment | Minimum wage MSC: Applicative
16. Refer to Figure 20-1. If the government imposes a minimum wage of $4, then how many workers will be em ployed?
a. 3000
b. 4000
c. 5000
d. 7000
ANS: C
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment | Minimum wage
MSC: Applicative
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
106 Chapter 20/Unemployment
17. Refer to Figure 20-1. If the government imposes a minimum wage of $4, then unemployment will increase by
a. 0 workers.
b. 2000 workers.
c. 4000 workers.
d. 5000 workers.
ANS: A
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment | Minimum wage MSC: Applicative
18. Refer to Figure 20-1. If the government imposes a minimum wage of $4, then employment will decrease by
a. 0 workers.
b. 2000 workers.
c. 3000 workers.
d. 4000 workers.
ANS: A
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment | Minimum wage
MSC: Applicative
19. Refer to Figure 20-1. If the government imposes a minimum wage of $8, then how many workers will be unem ployed?
a. 0
b. 3000
c. 4000
d. 7000
ANS: C
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment | Minimum wage MSC: Applicative
20. Refer to Figure 20-1. If the government imposes a minimum wage of $8, then how many workers will be em ployed?
a. 3000
b. 4000
c. 5000
d. 7000
ANS: A
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment | Minimum wage
MSC: Applicative
21. Refer to Figure 20-1. If the government imposes a minimum wage of $8, then unemployment will increase by
a. 0 workers.
b. 2000 workers.
c. 4000 workers.
d. 7000 workers.
ANS: C
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment | Minimum wage MSC: Applicative
22. Refer to Figure 20-1. If the government imposes a minimum wage of $8, then employment will decrease 0 by
a. workers.
b. 2000 workers.
c. 3000 workers.
d. 4000 workers.
ANS: B
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment | Minimum wage
MSC: Applicative
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 107
23. Refer to Figure 20-1. If unemployment is 2000 workers, then the minimum wage must be
a. $4.
b. $5.
c. $7.
d. $8.
ANS: C
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment | Minimum wage MSC: Applicative
24. Which of the following is correct?
a. In the U.S. it is only among the least skilled and least experienced members of the labor force that
minimum-wage laws cause unemployment. Unions may keep wages above their equilibrium level.
b. In the U.S. it is only among the least skilled and least experienced members of the labor force that
minimum-wage laws cause unemployment. Unions cannot keep wages above their equilibrium
level.
c. In the U.S. minimum-wage laws cause unemployment even for people with high skills and much
experience. Unions may keep wages above their equilibrium level.
d. In the U.S. minimum-wage laws cause unemployment even for people with high skills and much
experience. Unions cannot keep wages above their equilibrium level.
ANS: A
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage | Unemployment MSC: Interpretive
25. If the wage is kept above the equilibrium wage for any reason, the result is
a. cyclical unemployment.
b. frictional unemployment.
c. seasonal unemployment.
d. structural unemployment.
ANS: D
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Interpretive
26. Wages in excess of their equilibrium level help explain
a. frictional but not structural unemployment.
b. structural but not frictional unemployment.
c. both frictional and structural unemployment.
d. neither frictional nor structural unemployment.
ANS: B
PTS: 1
DIF: 2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment | Frictional unemployment MSC:
REF:
20-3
Interpretive
27. Wages in excess of their equilibrium level help explain
a. structural unemployment but not the natural rate of unemployment.
b. the natural rate of unemployment but not structural unemployment.
c. both structural unemployment and the natural rate of unemployment.
d. neither structural unemployment nor the natural rate of unemployment.
ANS: C
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment | Natural rate of unemployment
MSC: Interpretive
28. Other things the same, an increase in wages above their equilibrium level
a. increases frictional unemployment but leaves the natural rate of unemployment unchanged.
b. increases frictional unemployment and increases the natural rate of unemployment.
c. increases structural unemployment but leaves the natural rate of unemployment unchanged.
d. increases structural unemployment and increases the natural rate of unemployment.
ANS: D
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment | Natural rate of unemployment
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
108 Chapter 20/Unemployment
29. Which of the following does not create unemployment by keeping wages above the equilibrium level?
a. efficiency wages
b. job search
c. minimum-wage laws
d. unions
ANS: B
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Interpretive
30. When the wage is above the equilibrium level,
a. the labor market is functioning more efficiently than it otherwise would function.
b. there is a shortage of labor.
c. the quantity of labor supplied exceeds the quantity of labor demanded.
d. job search is the primary explanation for the unemployment that is observed.
ANS: C
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Labor markets
TOP: Wages
MSC: Interpretive
31. Workers searching for jobs that best suit them is most closely associated with
a. cyclical unemployment.
b. frictional unemployment.
c. seasonal unemployment.
d. structural unemployment.
ANS: B
PTS: 1
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Interpretive
32. Workers waiting for jobs to open up is most closely associated with
a. cyclical unemployment.
b. frictional unemployment.
c. seasonal unemployment.
d. structural unemployment.
ANS: D
PTS: 1
DIF: 2
REF:
NAT: Analytic
LOC: Unemployment and inflation
TOP:
MSC: Interpretive
20-3
Structural unemployment
33. U.S. Department of Labor data show that minimum-wage workers tend to be
a. young and less educated.
b. young and more educated.
c. old and less educated.
d. old and more educated.
ANS: A
PTS: 1
DIF: 1
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Minimum wage
MSC: Definitional
34. U.S. Department of Labor data show that minimum-wage workers tend to be
a. more likely to be working part time and in the communication industry.
b. more likely to be working part time and in the leisure and hospitality industry.
c. more likely to be working full time and in the communication industry.
d. more likely to be working full time and in the leisure and hospitality industry.
ANS: B
PTS: 1
DIF: 1
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Minimum wage
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 109
UNIONS AND COLLECTIVE BARGAINING
1. Which of the following is not correct?
a. A union is a worker association that bargains with employers over wages, benefits, and working
conditions.
b. Unions play a much larger role in the U.S. labor market now than they did in the past.
c. Unions play a large role in many European countries.
d. A union is a type of cartel.
ANS: B
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions MSC: Interpretive
2. Between the 1940s and today, union membership in the U.S.
a. rose from about one-eighth to one-third of the labor force.
b. rose from about one-third to one-half of the labor force.
c. fell from about one-half to one-third of the labor force.
d. fell from about one-third to one-eighth of the labor force.
ANS: D
DIF: 2
REF: 20-4
LOC: Labor markets
TOP: Unions MSC:
NAT: Analytic
Interpretive
3. In Belgium, Norway, and Sweden, the percentage of workers who belong to unions is
a. almost zero.
b. less than it is in the United States.
c. about the same as it is in the United States.
d. greater than it is in the United States.
ANS: D
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions MSC: Interpretive
4. Since the 1940s U.S. union membership has
a. fallen. This decline should have reduced structural unemployment.
b. fallen. This decline should not have reduced structural unemployment.
c. risen. This increase should have raised structural unemployment.
d. risen. This increase should not have raised structural unemployment.
ANS: A
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions MSC: Applicative
5. Sam has no job but keeps applying to get a job with a business that is unionized. He is qualified and he finds the
pay attractive, but the firm is not hiring. Sam is
a. structurally unemployed. Structural unemployment exists even in the long run.
b. structurally unemployed. Structural unemployment does not exist in the long run.
c. frictionally unemployed. Frictional unemployment exists even in the long run.
d. frictionally unemployed. Frictional unemployment does not exist in the long run.
ANS: A
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions MSC: Applicative
6. Which of the following is not correct?
a. When a union is present in a labor market, wages are not determined by the equilibrium of supply
and demand.
b. Like any cartel, a union is a group of sellers acting together in the hope of exerting their joint
market power.
c. The process by which unions and firms agree on the terms of employment is called a strike.
d. Most workers in the U.S. economy are not members of a union.
ANS: C
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
110 Chapter 20/Unemployment
7. Which of the following is not correct?
a. When a union is present in a labor market, wages are determined by the equilibrium of supply and
demand.
b. Like any cartel, a union is a group of sellers acting together in the hope of exerting their joint
market power.
c. The process by which unions and firms agree on the terms of employment is called collective
bargaining.
d. Most workers in the U.S. economy are not members of a union.
ANS: A
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions MSC: Interpretive
8. Collective bargaining refers to
a. the process by which the government sets exemptions from the minimum wage law.
b. setting the same wage for all employees to prevent conflict among workers.
c. firms colluding to set the wages of employees below equilibrium.
d. the process by which unions and firms agree on the terms of employment.
ANS: D
DIF: 1
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Collective bargaining
MSC: Definitional
9. Which of the following is not correct?
a. An organized withdrawal of labor from a firm by a union is called a strike.
b. The power of a union comes from its ability to strike if the union and the firm do not agree on the
terms of employment.
c. Economists who study the effects of unions typically find that union workers earn about 25 to 35
percent more than similar workers who do not belong to unions.
d. Workers in unions reap the benefit of collective bargaining, while workers not in unions bear some
of the cost.
ANS: C
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Strikes
MSC: Interpretive
10. Economists have found that union workers earn what percent more than similar nonunion workers?
a. 0 to 5
b. 5 to 10
c. 10 to 20
d. 20 to 30
ANS: C
DIF: 1
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions | Wages
MSC: Definitional
11. When a union raises the wage above the equilibrium level, it
a. reduces both the quantity of labor supplied and the quantity of labor demanded.
b. reduces the quantity of labor supplied and raises the quantity of labor demanded.
c. raises the quantity of labor supplied and reduces the quantity of labor demanded.
d. raises both the quantity of labor supplied and the quantity of labor demanded.
ANS: C
DIF: 1
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Unemployment
MSC: Definitional
12. When a union raises the wage above the equilibrium level,
a. the quantity of labor supplied and unemployment both rise.
b. the quantity of labor supplied and unemployment both fall.
c. the quantity of labor supplied rises and unemployment falls.
d. the quantity of labor supplied falls and unemployment rises.
ANS: A
DIF: 1
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Unemployment
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 111
13. When a union bargains successfully with employers, in that industry,
a. both the quantity of labor supplied and the quantity of labor demanded increase.
b. both the quantity of labor supplied and the quantity of labor demanded decrease.
c. the quantity of labor supplied increases and the quantity of labor demanded decreases.
d. the quantity of labor demanded increases and the quantity of labor supplied decreases.
ANS: C
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions MSC: Interpretive
14. When a union bargains successfully with employers, in that industry,
a. wages and unemployment increase.
b. wages increase and unemployment decreases.
c. wages decrease and unemployment increases.
d. wages and unemployment decrease.
ANS: A
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Unemployment | Wages
MSC: Interpretive
15. The introduction of a union into an industry
a. raises wages and employment in that industry.
b. lowers wages and employment in that industry.
c. lowers wages and raises employment in that industry.
d. raises wages and lowers employment in that industry.
ANS: D
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Wages | Employment
MSC: Interpretive
16. The introduction of a union into an industry
a. creates a surplus of labor and so raises unemployment.
b. creates a surplus of labor and so reduces unemployment.
c. creates a shortage of labor and so raises unemployment.
d. creates a shortage of labor and so reduces unemployment.
ANS: A
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Wages | Employment
MSC: Interpretive
17. Which of the following do unions not cause?
a. frictional unemployment
b. the wage to rise above the equilibrium level
c. conflict between insiders who benefit from high union wages and outsiders who do not get the
union jobs
d. reduced wages in industries without unions
ANS: A
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Structural unemployment
MSC: Interpretive
18. If outsiders had more say in union contracts then it is likely that union wages would be
a. higher so unemployment would be higher.
b. higher so unemployment would be lower.
c. lower so unemployment would be higher.
d. lower so unemployment would be lower.
ANS: D
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Structural unemployment
MSC: Analytical
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
112 Chapter 20/Unemployment
19. Unions contribute to
a. cyclical unemployment.
b. frictional unemployment.
c. seasonal unemployment.
d. structural unemployment.
ANS: D
DIF: 2
LOC: Unemployment and inflation
MSC: Interpretive
REF:
TOP:
20-4
NAT: Analytic
Unions | Structural unemployment
20. Unions contribute to
a. frictional but not structural unemployment.
b. structural but not frictional unemployment.
c. both frictional and structural unemployment.
d. neither frictional nor structural unemployment.
ANS: B
DIF: 2
REF: 20-4
LOC: Unemployment and inflation
TOP: Unions | Structural unemployment | Frictional unemployment
MSC: Interpretive
NAT: Analytic
21. Unions contribute to
a. structural unemployment but not the natural rate of unemployment.
b. the natural rate of unemployment but not structural unemployment.
c. both structural unemployment and the natural rate of unemployment.
d. neither structural unemployment nor the natural rate of unemployment.
ANS: C
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Structural unemployment | Natural rate of unemployment
MSC: Interpretive
22. Unions contribute to
a. frictional unemployment but not the natural rate of unemployment.
b. the natural rate of unemployment but not frictional unemployment.
c. both frictional unemployment and the natural rate of unemployment.
d. neither frictional unemployment nor the natural rate of unemployment.
ANS: B
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Structural unemployment | Natural rate of unemployment
MSC: Interpretive
23. Unions
a. do not affect the natural rate of unemployment.
b. lower the wages of unionized workers.
c. raise the profits of unionized firms.
d. lower the wages of workers in industries without unions.
ANS: D
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Wages
MSC: Interpretive
24. Unions
a. raise the wages of unionized workers and raise unemployment.
b. raise the wages of unionized workers and reduce unemployment.
c. reduce the wages of unionized workers and raise unemployment.
d. reduce the wages of unionized workers and reduce unemployment.
ANS: A
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Wages
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 113
25. If unions were formed in more industries, the supply of labor in other industries would
a. increase, causing employment in other industries to rise.
b. increase, causing employment in other industries to fall.
c. decrease, causing employment in other industries to rise.
d. decrease, causing employment in other industries to fall.
ANS: A
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment | Unions
MSC: Analytical
26. The effects of unionization on wages in the sectors of the economy that are unionized causes the supply of labor in
other sectors of the economy to
a. decrease, raising wages in industries that are not unionized.
b. decrease, reducing wages in industries that are not unionized.
c. increase, raising wages in industries that are not unionized.
d. increase, reducing wages in industries that are not unionized.
ANS: D
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Wages
MSC: Interpretive
27. Suppose that telemarketers are not unionized. If they unionize, then the supply of labor in other sectors of the eco nomy will
a. decrease, raising wages in industries that are not unionized.
b. decrease, reducing wages in industries that are not unionized.
c. increase, raising wages in industries that are not unionized.
d. increase, reducing wages in industries that are not unionized.
ANS: D
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Wages
MSC: Interpretive
28. Suppose that neither textile workers nor shoemakers are unionized. If textile workers unionize, then the supply of
shoemakers will
a. rise and their wages will rise.
b. rise and their wages will fall.
c. fall and their wages will fall.
d. fall and their wages will rise.
ANS: B
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Wages
MSC: Interpretive
29. Suppose that butchers and bakers have no unions. Now suppose the butchers form a union. What does this do the
labor supply of and wages of bakers?
a. It increases the labor supply and wages of bakers.
b. It increases the labor supply and decreases the wages of bakers.
c. It decreases the labor supply and increases the wages of bakers.
d. It decreases the labor supply and wages of bakers.
ANS: B
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Wages
MSC: Interpretive
30. Suppose that computer factory workers and cell phone factory workers have no unions. Now suppose that cell
phone factory workers form unions. What does this do the labor supply of and wages of workers in computer
factories?
a. It increases the labor supply and wages of computer factory workers.
b. It increases the labor supply and decreases the wages of computer factory workers.
c. It decreases the labor supply and increases the wages of computer factory workers.
d. It decreases the labor supply and wages of computer factory workers.
ANS: B
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Wages
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
114 Chapter 20/Unemployment
31. Consider two labor markets in which jobs are equally attractive in all respects other than the wage rate. All work ers are equally able to do either job. Initially, both labor markets are perfectly competitive. If a union organizes
workers in one of the markets, then the wage rates will tend to
a. rise in both markets.
b. fall in both markets
c. rise for the union jobs, but remain unchanged for the nonunion jobs.
d. rise for the union jobs and fall for the nonunion jobs.
ANS: D
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Wages
MSC: Interpretive
32. Suppose that grocery clerks and nurses are not unionized. If the nurses unionize, then
a. the wages of both grocery clerks and nurses will rise.
b. the wages of both grocery clerks and nurses will fall.
c. the wages of grocery clerks will rise and the wages of nurses will fall.
d. the wages of nurses will rise and the wages of grocery clerks will fall.
ANS: D
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Wages
MSC: Interpretive
33. Suppose that appliance factory workers and furniture factory workers are not unionized. If the furniture factory
workers unionize, then
a. the wages of appliance factory workers will rise and the wages of furniture factory workers will
fall.
b. the wages of furniture factory workers will rise and the wages of appliance factory workers will
fall.
c. the wages of both appliance factory workers and furniture factory workers will rise.
d. the wages of both appliance factory workers and furniture factory workers will fall.
ANS: B
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions | Wages
MSC: Interpretive
34. Suppose that furniture factory worker are unionized. If these workers decide not to be unionized,
a. the quantity of furniture factory workers demanded will rise. The supply of workers in other
industries will also rise.
b. the quantity of furniture factory workers demanded will rise. The supply of workers in other
industries will fall.
c. the quantity of furniture factory workers demanded will fall. The supply of workers in other
industries will rise.
d. the quantity of furniture factory workers demanded will fall. The supply of workers in other
industries will also fall.
ANS: B
DIF: 3
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions MSC: Analytical
35. Suppose that autoworkers are unionized in one region of the country but not in the other. If the unionized workers
abolished their unions, employment
a. and wages of autoworkers in that region would rise.
b. of automobile workers in that region would rise, but wages of automobile workers in that region
would fall.
c. and wages of autoworkers in that region would fall.
d. of automobile workers in that region would fall but wages of automobile workers in that region
would rise.
ANS: B
DIF: 3
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Unions
MSC: Analytical
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 115
36. Which of the following is not correct?
a. Unions are exempt from U.S. antitrust laws.
b. The Wagner Act of 1935 prevents U.S. employers from interfering when workers try to organize
unions.
c. The National Labor Relations Board is the U.S. government agency that enforces workers right to
unionize.
d. Right-to-work laws prevent firms from hiring permanent replacements for workers who are on
strike.
ANS: D
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions | Right-to-work laws
MSC: Interpretive
37. The Wagner Act of 1935
a. prevents unions from acting as cartels.
b. allows workers joining a unionized firm to choose not to join the union.
c. prevents employers from interfering when workers try to organize a union.
d. prevents firms from hiring permanent replacements for workers who are on strike.
ANS: C
DIF: 1
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Wagner Act
MSC: Definitional
38. The National Labor Relations Board
a. enforces antitrust laws against unions.
b. enforces workers' rights to unionize.
c. acts as a union's representative in collective bargaining.
d. is required to approve all collective bargaining agreements before they can be enforced.
ANS: B
DIF: 1
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: National Labor Relations Board
MSC: Definitional
39. Right-to-work laws
a. guarantee workers the right to form unions.
b. give workers in a unionized firm the right to choose whether to join the union.
c. prevent employers from hiring permanent replacements for workers who are on strike.
d. prevent workers from being fired because of increases in wages brought about by collective
bargaining.
ANS: B
DIF: 1
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Right-to-work laws
MSC: Definitional
40. In the absence of right-to-work laws, workers
a. that went on strike could be permanently replaced.
b. might be required to join the union if they worked for a unionized firm.
c. would not be able to unionize.
d. would not be able to strike.
ANS: B
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Right-to-work laws
MSC: Interpretive
41. Which of the following is correct?
a. There is consensus among economists that unions are good for the economy.
b. There is consensus among economists that unions are bad for the economy.
c. There is consensus among economists that, on net, unions have almost no impact on
macroeconomic variables.
d. There is no consensus among economists about whether unions are good or bad for the economy.
ANS: D
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
116 Chapter 20/Unemployment
42. There is a clear consensus among economists that unions are
a. good for the economy because they result in higher wages for most workers.
b. good for the economy because they are a necessary antidote to the market power of employers.
c. bad for the economy because they are cartels and therefore detrimental to an efficient allocation of
resources.
d. None of the above is correct; there is no clear consensus among economists about whether unions
are good or bad for the economy.
ANS: D
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions MSC: Interpretive
43. Which of the following is correct?
a. In unionized industries wages are above the level that would prevail in competitive markets.
b. The introduction of a union in some industry reduces the quantity of labor demanded in that
industry, causes some workers in that industry to be unemployed, and reduces wages in the rest of
the economy.
c. Critics argue that the allocation of labor resulting from unions is both inefficient and inequitable.
d. All of the above are correct.
ANS: D
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions MSC: Interpretive
44. Which of the following is not a contention of advocates of unions?
a. Unions are a necessary antidote to the market power of the firms that hire workers.
b. In the case of a company town, a union may balance the firms market power and protect the
workers from being at the mercy of the firms owners.
c. The introduction of a union benefits all workers in a firm.
d. Unions are important for helping firms respond efficiently to workers concerns.
ANS: C
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions MSC: Interpretive
45. Which of the following is correct?
a. Nearly all economists believe that unions are bad for the economy as a whole.
b. Unionized firms pay wages above the competitive equilibrium level.
c. Unions increase the level of employment in unionized firms.
d. Unions decrease the level of employment in firms without unions.
ANS: B
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions MSC: Interpretive
THE THEORY OF EFFICIENCY WAGES
1. The theory of efficiency wages explains why
a. setting wages at the equilibrium level may increase unemployment.
b. it may be in the best interest of firms to offer wages that are above the equilibrium level.
c. the most efficient way to pay workers is to pay them according to their skills.
d. it is efficient for firms to set wages at the equilibrium level.
ANS: B
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Interpretive
2. The theory of efficiency wages provides a possible explanation as to why
a. workers form unions.
b. firms should try to reduce surpluses of labor.
c. firms may be inclined to keep their workers wages above the equilibrium level.
d. firms may be inclined to keep their workers wages below the equilibrium level.
ANS: C
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 117
3. Paying efficiency wages means that wages are
a. above equilibrium and profits are higher than otherwise.
b. above equilibrium and profits are lower than otherwise.
c. below equilibrium and profits are higher than otherwise.
d. below equilibrium and profits are lower than otherwise.
ANS: A
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Interpretive
4. Efficiency wages
a. increase productivity and reduce unemployment.
b. increase productivity but increase unemployment.
c. decrease productivity but reduce unemployment.
d. decrease productivity and increase unemployment.
ANS: B
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Efficiency wages | Frictional unemployment
MSC: Definitional
5. Suppose that efficiency wages become more common in the economy. Imposing efficiency wages
a. increases the quantity demanded and decreases the quantity supplied of labor.
b. decreases the quantity demanded and increases the quantity supplied of labor.
c. increases the quantity demanded and decreases the quantity supplied of labor.
d. decreases the quantity demanded and increases the quantity supplied of labor.
ANS: B
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Efficiency wages | Natural rate of unemployment
MSC: Interpretive
6. Efficiency wages create a labor
a. surplus and so increase unemployment.
b. surplus and so decrease unemployment.
c. shortage and so increase unemployment.
d. shortage and so decrease unemployment.
ANS: A
DIF: 2
REF:
LOC: Unemployment and inflation
TOP:
MSC: Interpretive
20-5
NAT: Analytic
Efficiency wages | Natural rate of unemployment
7. Efficiency wages
a. increase frictional unemployment by keeping wages above equilibrium.
b. decrease frictional unemployment by keeping wages at equilibrium.
c. increase structural unemployment by keeping wages above equilibrium.
d. decrease structural unemployment by keeping wages at equilibrium.
ANS: C
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Efficiency wages | Structural unemployment
MSC: Interpretive
8. Efficiency wages
a. create a shortage of labor, and so reduce unemployment.
b. create a shortage of labor, and so raise unemployment.
c. create a surplus of labor, and so reduce unemployment.
d. create a surplus of labor, and so raise unemployment.
ANS: D
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Efficiency wages | Frictional unemployment
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
118 Chapter 20/Unemployment
9. Efficiency-wage theory suggests that paying
a. low wages might be profitable because they raise the efficiency of a firms workers.
b. low wages might be profitable because they lower the efficiency of a firms workers.
c. high wages might be profitable because they raise the efficiency of a firms workers.
d. high wages might be profitable because they lower the efficiency of a firms workers.
ANS: C
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Interpretive
10. Efficiency wages contribute to
a. frictional unemployment and the natural rate of unemployment.
b. frictional unemployment but not the natural rate of unemployment.
c. structural unemployment and the natural rate of unemployment.
d. structural unemployment but not the natural rate of unemployment.
ANS: C
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Interpretive
11. Tara, the CEO of a corporation operating in a relatively poor country where wages are low, decides to raise the
wages of her workers even though she faces an excess supply of labor. Her decision
a. might increase profits if it means that the wage is high enough for her workers to eat a nutritious
diet that makes them more productive.
b. will help eliminate the excess supply of labor.
c. may cause her workers to increase shirking.
d. All of the above are correct.
ANS: A
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages | Worker health
MSC: Applicative
12. The efficiency-wage theory of worker health is
a. more relevant for explaining unemployment in less developed countries than in rich countries.
b. more relevant for explaining unemployment in rich countries than in less developed countries.
c. equally relevant for explaining unemployment in less developed countries and in rich countries.
d. not relevant for explaining unemployment.
ANS: A
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages | Worker health
MSC: Interpretive
13. Brian is the owner of a firm that produces bottled water in Washington state. There are many other such firms in
the area. Brian decides that if he pays his workers a wage higher than the going market wage, his profits will in crease. Which of the following is a likely explanation for his decision?
a. The higher the wage, the less often his workers will choose to leave his firm.
b. The higher the wage, the lower will be the cost of obtaining needed supplies.
c. The higher the wage, the more he can charge for his water.
d. The higher the wage, the more he will have to monitor his workers for shirking.
ANS: A
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages | Worker turnover
MSC: Applicative
14. The efficiency-wage theory of worker turnover suggests that firms with higher turnover will have
a. higher production costs and higher profits.
b. higher production costs and lower profits.
c. lower production costs and higher profits.
d. lower production costs and lower profits.
ANS: B
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages | Worker turnover
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 119
15. Noah, the owner of an electronics factory, decides to raise the wages of his workers even though he faces an excess
supply of labor. His decision
a. might increase profits if it attracts a better pool of workers to apply for his firms jobs.
b. will increase the excess supply of labor.
c. may increase the quality of his work force.
d. All of the above are correct.
ANS: D
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages | Worker quality
MSC: Applicative
16. Juanita decides to hire some additional workers for her vinyl siding factory. The equilibrium wage is $14 per hour.
Efficiency wage theory suggests that it is reasonable for Juanita to offer
a. $14 per hour.
b. less than $14 per hour, since some people would be willing to work for less.
c. less than $14 an hour to prevent shirking.
d. more than $14 per hour, so as to attract a better pool of applicants.
ANS: D
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages | Worker quality
MSC: Applicative
17. The efficiency-wage theory of worker quality suggests that if firms respond to a surplus of labor by reducing the
wage, then highly qualified workers will be
a. more likely to apply, and unemployment will increase.
b. more likely to apply, and unemployment will decrease.
c. less likely to apply, and unemployment will increase.
d. less likely to apply, and unemployment will increase.
ANS: B
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages | Worker quality
MSC: Interpretive
18. Monique is the newly appointed CEO of a company that manufactures external hard drives on an assembly line.
Her staff has told her that the output the firm produces, given the number of workers employed, indicates that some
workers may be shirking. According to efficiency wage theory, what should she do?
a. pay all workers more than the equilibrium wage rate
b. pay all workers below the equilibrium wage rate to make up for the loss from shirking
c. make sure that workers are getting paid exactly the equilibrium wage rate
d. pay bonuses to workers who report the shirking of other workers
ANS: A
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages | Worker effort
MSC: Applicative
19. A firm may pay efficiency wages in an attempt to
a. reduce incentives to shirk.
b. reduce turnover.
c. attract a well-qualified pool of applicants.
d. All of the above are correct.
ANS: D
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Interpretive
20. Which of the following is not a reason that paying efficiency wages may increase a firm's profit?
a. Efficiency wages increase worker health and therefore increase worker productivity.
b. Efficiency wages decrease worker turnover and therefore decrease hiring and training costs.
c. Efficiency wages decrease worker shirking and therefore increase worker productivity.
d. Efficiency wages are below the equilibrium wage rate, but still attract a sufficient number of
workers.
ANS: D
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
120 Chapter 20/Unemployment
21. Renee is the CEO of a corporation that hires nonunion labor. According to the theory of efficiency wages, if she
decides to pay her workers more than the competitive equilibrium wage, then
a. the profits of her firm might increase.
b. the higher wages will induce her workers to shirk.
c. the turnover of her workers may increase.
d. she will face a shortage of labor.
ANS: A
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Applicative
22. Four employers have justified their actions as follows. Whose logic is not consistent with the logic of efficiency
wage theory?
a. Jay develops a new assembly line technology that limits the amount of shirking workers can do, so
he reduces what he pays his employees so as to make it closer to the equilibrium wage.
b. Kay pays her workers less than the equilibrium wage so they won't have the time or money to look
for work somewhere else.
c. Ray pays his workers in a developing country more than the going wage hoping that they will get a
better diet and so be more productive.
d. None of the above is consistent with the logic of efficiency wage theory.
ANS: B
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Applicative
23. In the early 1900s, Henry Ford introduced
a. a high-wage policy, and this policy produced many of the effects predicted by efficiency-wage
theory.
b. a high-wage policy, and this policy produced none of the effects predicted by efficiency-wage
theory.
c. a low-wage policy, and this policy produced many of the effects predicted by efficiency-wage
theory.
d. a low-wage policy, and this policy produced none of the effects predicted by efficiency-wage
theory.
ANS: A
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Interpretive
24. Which of the following both make a firm more likely to pay efficiency wages?
a. it is easy to judge the quality of applicants and after workers have worked for the firm a while they
tend not to look for other jobs
b. it is easy to judge the quality of applicants and after workers have worked for the firm a while they
tend to look for other jobs
c. it is difficult to judge the quality of applicants and after workers have worked for the firm a while
they tend not to look for other jobs
d. it is difficult to judge the quality of applicants and after workers have worked for the firm a while
they tend to look for other jobs
ANS: D
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Efficiency wages
MSC: Interpretive
25. According to the theory of efficiency wages, if a firm stops paying efficiency wages it is likely to see
a. an increase in the number of job applicants and an increase in how long workers stay on the job
b. an increase in the number of job applicants and a decrease in how long workers stay on the job
c. a decrease in the number of job applicants and an increase in how long workers stay on the job
d. a decrease in the number of job applicants and a decrease in how long workers stay on the job
ANS: D
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Efficiency wages
MSC: Applicative
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 121
26. Which of the following is not a reason economies experience structural unemployment?
a. job search
b. unions
c. minimum-wage laws
d. efficiency wages
ANS: A
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Interpretive
27. Which of the following causes of unemployment is associated with a wage rate above the market equilibrium
level?
a. minimum-wage laws
b. unions
c. efficiency wages
d. All of the above are correct.
ANS: D
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Interpretive
28. Which of the following causes of unemployment is not associated with a wage rate above the market equilibrium
level?
a. efficiency wages
b. job search
c. minimum-wage laws
d. unions
ANS: B
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Interpretive
29. If there were no factors keeping wages from reaching equilibrium then there would be no
a. cyclical unemployment.
b. frictional unemployment.
c. structural unemployment.
d. natural rate of unemployment.
ANS: C
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Interpretive
30. Minimum-wage laws, unions, and efficiency wages contribute to
a. both structural unemployment and the natural rate of unemployment.
b. neither structural unemployment nor the natural rate of unemployment.
c. structural unemployment, but not the natural rate of unemployment.
d. the natural rate of unemployment, but not structural unemployment.
ANS: A
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment | Natural rate of unemployment
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
122 Chapter 20/Unemployment
31. Sectoral changes in demand
a. create frictional unemployment, while firms paying wages above equilibrium to attract a better pool
of candidates creates structural unemployment.
b. create structural unemployment, while firms paying wages above equilibrium to attract a better pool
of candidates creates frictional unemployment.
c. and firms paying wages above equilibrium to attract a better pool of candidates both create
structural unemployment.
d. and firms paying wages above equilibrium to attract a better pool of candidates both create
frictional unemployment.
ANS: A
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Efficiency wages | Sectoral shifts | Frictional unemployment | Structural unemployment
MSC: Interpretive
32. Job search
a. and firms paying wages above equilibrium to improve worker health both create frictional
unemployment.
b. creates frictional unemployment, while firms paying wages above equilibrium to improve worker
health creates structural unemployment.
c. creates structural unemployment, while firms paying wages above equilibrium to improve worker
health creates frictional unemployment.
d. and firms paying wages above equilibrium to improve worker health both create structural
unemployment.
ANS: B
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Efficiency wages | Job search | Frictional unemployment | Structural unemployment
MSC: Interpretive
33. Minimum-wage laws
a. create frictional unemployment, while firms paying wages above equilibrium to reduce worker
turnover creates structural unemployment.
b. create structural unemployment, while firms paying wages above equilibrium to reduce worker
turnover creates frictional unemployment.
c. and firms paying wages above equilibrium to reduce worker turnover both create structural
unemployment.
d. and firms paying wages above equilibrium to reduce worker turnover both create frictional
unemployment.
ANS: C
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Efficiency wages | Minimum wage | Frictional unemployment | Structural unemployment
MSC: Interpretive
34. Unions
a. and firms paying wages above equilibrium to improve worker effort both create frictional
unemployment.
b. creates frictional unemployment, while firms paying wages above equilibrium to improve worker
effort creates structural unemployment.
c. creates structural unemployment, while firms paying wages above equilibrium to improve worker
effort creates frictional unemployment.
d. and firms paying wages above equilibrium to improve worker effort both create structural
unemployment.
ANS: D
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Efficiency wages | Unions | Frictional unemployment | Structural unemployment
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 123
35. Efficiency wages, minimum-wage laws, and unions all
a. keep wages below the equilibrium level, causing a shortage of labor.
b. keep wages below the equilibrium level, causing a surplus of labor.
c. keep wages above the equilibrium level, causing a shortage of labor.
d. keep wages above the equilibrium level, causing a surplus of labor.
ANS: D
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage | Unions | Efficiency wages
MSC: Interpretive
36. Minimum-wage laws and unions are similar to each other but different from efficiency wages in that minim um-wage law and unions
a. cause unemployment, but efficiency wages do not.
b. cause the quantity of labor supplied to exceed the quantity of labor demanded, but efficiency wages
do not.
c. cause wages to be above the equilibrium level.
d. prevent firms from lowering wages in the presence of a surplus of workers.
ANS: D
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage | Unions | Efficiency wages
MSC: Interpretive
TRUE/FALSE
1. Most people rely primarily on income other than their labor earnings to maintain their standard of living.
ANS: F
DIF: 1
REF: 20-0
NAT: Analytic
LOC: The study of economics and definitions in economics TOP: Income | Standard of living
MSC: Definitional
2. The amount of unemployment that a country typically experiences is a determinant of its standard of living.
ANS: T
DIF: 1
REF: 20-0
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment | Standard of living
MSC: Definitional
3. Some degree of unemployment is inevitable in a complex economy.
ANS: T
DIF: 1
REF: 20-0
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Definitional
4. The amount of unemployment varies little over time and across countries.
ANS: F
DIF: 1
REF: 20-0
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Definitional
5. When a country keeps its workers as fully employed as possible, it achieves a higher level of GDP than if many of
its workers were idle.
ANS: T
DIF: 1
REF: 20-0
NAT: Analytic
LOC: The study of economics and definitions in economics TOP: Employment | GDP
MSC: Definitional
6. The natural rate of unemployment refers to the current unemployment rate.
ANS: F
DIF: 1
REF: 20-0
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Definitional
7. An economys natural rate of unemployment refers to the amount of unemployment that the economy normally ex periences.
ANS: T
DIF: 1
REF: 20-0
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Definitional
8. Cyclical unemployment refers to the year-to-year fluctuations in unemployment around its natural rate.
ANS: T
DIF: 1
REF: 20-0
NAT: Analytic
LOC: Unemployment and inflation
TOP: Cyclical unemployment
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
124 Chapter 20/Unemployment
9. The natural rate of unemployment is closely associated with the short-run ups and downs of economic activity.
ANS: F
DIF: 1
REF: 20-0
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment | Cyclical unemployment
MSC: Definitional
10. The natural rate of unemployment is the desirable rate of unemployment for an economy.
ANS: F
DIF: 1
REF: 20-0
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Definitional
11. The natural rate of unemployment is constant over time.
ANS: F
DIF: 1
REF: 20-0
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Definitional
12. The natural rate of unemployment is impervious to economic policy.
ANS: F
DIF: 1
REF: 20-0
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Definitional
13. Government policy can do nothing about the natural rate of unemployment.
ANS: F
DIF: 2
REF: 20-0
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Interpretive
14. The natural rate of unemployment is any type of unemployment that does not go away on its own even in the long
run.
ANS: T
DIF: 1
REF: 20-0
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Definitional
15. Long-run unemployment arises from a single problem that has a single solution.
ANS: F
DIF: 1
REF: 20-0
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Definitional
16. There is no easy way for policymakers to reduce the economys natural rate of unemployment.
ANS: T
DIF: 1
REF: 20-0
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Definitional
17. Measuring unemployment is the job of the Bureau of Labor Statistics.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Bureau of Labor Statistics
MSC: Definitional
18. Measuring unemployment is the job of the Bureau of Labor Statistics, which is part of the U.S. Department of
Commerce.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Bureau of Labor Statistics
MSC: Definitional
19. Every week, the Bureau of Labor Statistics produces data on unemployment.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Bureau of Labor Statistics
MSC: Definitional
20. The Bureau of Labor Statistics produces data on unemployment, types of employment, length of the average work week, and the duration of unemployment.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Bureau of Labor Statistics
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 125
21. The Bureau of Labor Statistics produces data on unemployment and other aspects of the labor market from a regu lar survey of about 600 households, called the Current Population Survey.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Bureau of Labor Statistics
MSC: Definitional
22. The Bureau of Labor Statistics produces data on unemployment and other aspects of the labor market from a regu lar survey of about 60,000 households, called the Current Population Survey.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Bureau of Labor Statistics
MSC: Definitional
23. The Bureau of labor statistics divides the adult population into two categorizes, those who are employed and those
who are unemployed.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Analytical
24. The Bureau of Labor Statistics divides the adult population into three categories: employed, unemployed, and not
in the labor force.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Bureau of Labor Statistics
MSC: Definitional
25. The Bureau of Labor Statistics divides the adult population into four categories: employed, underemployed, unem ployed, and not in the labor force.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Bureau of Labor Statistics
MSC: Definitional
26. The Bureau of Labor Statistics employed category includes those who worked as paid employees, worked in
their own business, or worked as unpaid workers in a family members business.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Bureau of Labor Statistics | Employment
MSC: Definitional
27. Only paid workers are included in the Bureau of Labor Statistics employed category.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment
MSC: Interpretive
28. Both full-time and part-time workers are included in the Bureau of Labor Statistics employed category.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment
MSC: Definitional
29. Someone who has a job but is absent from work because she is on vacation is counted as employed.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Definitional
30. Some adults who were not working are included in the Bureau of Labor Statistics employed category.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment
MSC: Interpretive
31. Adults who were not working but who had jobs from which they were temporarily absent are included in the Bur eau of Labor Statistics employed category.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment
MSC: Definitional
32. Adults who were waiting to be recalled to a job from which they had been laid off are included in the Bureau of
Labor Statistics employed category.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
126 Chapter 20/Unemployment
33. The Bureau of Labor Statistics produces data on unemployment based on the number of people collecting unem ployment insurance.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Definitional
34. The Bureau of Labor Statistics unemployed category includes those who were not employed, were available for
work, and had tried to find employment during the previous 4 weeks.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Definitional
35. Every adult who was not employed during the previous 4 weeks is included in the Bureau of Labor Statistics un employed category.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Bureau of Labor Statistics | Unemployment
MSC: Interpretive
36. Someone who is without work but is not looking for work is included in the Bureau of Labor Statistics unem ployed category.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Bureau of Labor Statistics | Unemployment
MSC: Interpretive
37. Full-time students and homemakers are included in the Bureau of Labor Statistics unemployed category.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Interpretive
38. Unpaid stay-at-home fathers are included in the Bureau of Labor Statistics unemployed category.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Bureau of Labor Statistics | Unemployment
MSC: Interpretive
39. Adults who are waiting to be recalled to a job from which they had been laid off are counted as unemployed.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Definitional
40. Retirees are included in the Bureau of Labor Statistics not in the labor force category.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force
MSC: Definitional
41. The adult population must equal the sum of the employed, the unemployed, and those not in the labor force.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Adult population
MSC: Interpretive
42. The adult population must equal the sum of the employed and the unemployed.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Adult population
MSC: Interpretive
43. The labor force equals the sum of the employed and the unemployed.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force
MSC: Definitional
44. The labor force minus the number of employed equals the number of unemployed.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 127
45. The unemployment rate equals the percentage of the adult population that is unemployed.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate
MSC: Definitional
46. The unemployment rate equals the percentage of the labor force that is unemployed.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate
MSC: Definitional
47. The Bureau of Labor Statistics computes unemployment rates for the entire adult population and for more narrowly
defined groups.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate
MSC: Definitional
48. The labor-force participation rate equals the percentage of the labor force that is employed.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force participation rate
MSC: Definitional
49. The labor-force participation rate equals the percentage of the labor force that is either employed or unemployed.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force participation rate
MSC: Definitional
50. The labor-force participation rate equals the percentage of the total adult population that is in the labor force.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Bureau of Labor Statistics | Labor force participation rate
MSC: Definitional
51. The labor-force participation rate tells us the fraction of the population that is able to participate in the labor mar ket.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force participation rate
MSC: Definitional
52. The adult labor-force participation rate tells us the fraction of the population that has chosen to participate in the
labor market.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force participation rate
MSC: Definitional
53. If the number of people unemployed rose but the number of people employed and the adult population stayed the
same, then the labor force participation rate would rise.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force participation rate
MSC: Analytical
54. The Bureau of Labor Statistics computes labor-force participation rates for the entire adult population and for more
narrowly defined groups.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force participation rate
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
128 Chapter 20/Unemployment
Table 20-5
2010 Labor Data for Tajnia
Number of adults employed
Number of adults unemployed
Number of adults not in the labor force
10,000
2,250
17,750
55. Refer to Table 20-5. The total adult population of Tajnia in 2010 is 30,000.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Adult population
MSC: Applicative
56. Refer to Table 20-5. The labor force of Tajnia in 2010 is 12,250.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force
MSC: Applicative
57. Refer to Table 20-5. The labor force of Tajnia in 2010 is 10,000.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force
MSC: Applicative
58. Refer to Table 20-5. The unemployment rate of Tajnia in 2010 is about 18.4 percent.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate
MSC: Applicative
59. Refer to Table 20-5. The unemployment rate of Tajnia in 2010 is about 7.5 percent.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate
MSC: Applicative
60. Refer to Table 20-5. The labor-force participation rate of Tajnia in 2010 is about 40.8 percent.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force participation rate
MSC: Applicative
61. Refer to Table 20-5. The labor-force participation rate of Tajnia in 2010 is about 33.3 percent.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force participation rate
MSC: Applicative
62. Within the U.S. population, women ages 20 and older have lower rates of labor-force participation than men.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Definitional
63. Within the U.S. population, women ages 20 and older have similar rates of labor-force participation as men.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Definitional
64. Within the U.S. population, women have higher rates of unemployment than men.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Definitional
65. Within the U.S., blacks have higher rates of unemployment than whites.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Definitional
66. Within the U.S., blacks and whites have similar rates of unemployment.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 129
67. Within the U.S., teenagers have lower rates of labor-force participation than older workers.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Definitional
68. Within the U.S., teenagers have similar rates of labor-force participation as older workers.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Definitional
69. Within the U.S., teenagers have higher rates of unemployment than older workers.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Definitional
70. Within the U.S., teenagers have similar rates of unemployment as older workers.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor-force demographics
MSC: Definitional
71. Data on the unemployment rate in the U.S. since 1960 show that the economy always has some unemployment and
that the amount changes from year to year.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate facts
MSC: Definitional
72. Data on the unemployment rate in the U.S. since 1960 show that the unemployment rate sometimes is close to
zero.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment rate facts
MSC: Interpretive
73. The normal rate of unemployment around which the unemployment rate fluctuates is called the natural rate of un employment.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Definitional
74. The normal rate of unemployment around which the unemployment rate fluctuates is called cyclical unemploy ment.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Definitional
75. The deviation of unemployment from its natural rate is called cyclical unemployment.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Cyclical unemployment
MSC: Definitional
76. Economists at the Congressional Budget Office estimated that for 2009, the U.S. natural rate of unemployment was
5.0 percent.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Definitional
77. In 2009, the U.S. natural rate of unemployment was estimated to be 5.0 percent, which at the time was close to the
actual rate of unemployment of 9.3 percent.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
130 Chapter 20/Unemployment
78. Causes of the changing role of women in American society over the past several decades include new technologies
that have reduced the amount of time required to complete routine household tasks, improved birth control, and
changing political and social attitudes.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Role of women
MSC: Interpretive
79. Over the past several decades, the difference between the labor-force participation rates of men and women in the
U.S. has gradually decreased.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force participation rate
MSC: Definitional
80. Over the past several decades, the difference between the labor-force participation rates of men and women in the
U.S. has gradually increased.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force participation rate
MSC: Definitional
81. Over the past several decades in the United States, the labor-force participation rate of women has increased and
the labor-force participation rate of men had decreased.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force participation rate
MSC: Definitional
82. Over the past several decades in the United States, the labor-force participation rate of women has increased and
the labor-force participation rate of men had remained steady.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force participation rate
MSC: Definitional
83. Causes of the decline in the U.S. mens labor-force participation rate over the past several decades include young
men now staying in school longer than their fathers and grandfathers did, older men now retiring earlier and living
longer, and more fathers now staying at home to raise their children.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force participation rate
MSC: Interpretive
84. Even though the difference in labor-force participation rates of U.S. males and females has narrowed, the laborforce participation rate of males remains higher than that of females.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force participation rate
MSC: Interpretive
85. Measuring the amount of unemployment in the economy is a straightforward task.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Definitional
86. More than one-third of the unemployed are recent entrants into the labor force.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Definitional
87. More than three-fourths of the unemployed are recent entrants into the labor force.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Definitional
88. Not all unemployment ends with the job seeker finding a job.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 131
89. Almost half of all spells of unemployment end when the unemployed person leaves the labor force.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment spells
MSC: Definitional
90. Almost nine-tenths of all spells of unemployment end when the unemployed person finds a job.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment spells
MSC: Definitional
91. Because people move into and out of the labor force so often, statistics on unemployment are difficult to interpret.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Definitional
92. If people who report being unemployed are not, in fact, trying hard to find a job, then the reported unemployment
rate will be baised upward.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Interpretive
93. Rupert is collecting unemployment insurance benefits. To continue to receive his benefits, he must be looking for
work. Because hed like to continue collecting benefits rather than take a job, he applies at places that are unlikely
to hire him. People like Rupert make the reported unemployment rate less than it would otherwise be.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Interpretive
94. People who report being unemployed but who, in fact, are working for under the table pay to avoid taxes on their
earnings are really employed and therefore cause the reported unemployment rate to be higher than it would other wise be.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Interpretive
95. People who report being not in the labor force but who, in fact, want to work but have given up trying to find a job
after an unsuccessful search cause the reported unemployment rate to be lower than it would otherwise be.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Interpretive
96. Discouraged workers are people who want to work but have given up trying to find a job after an unsuccessful
search.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Definitional
97. It is best to view the official unemployment rate as a useful but imperfect measure of joblessness.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Definitional
98. The unemployment rate reported by the Bureau of Labor Statistics clearly understates the true unemployment rate.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment measurement issues
MSC: Interpretive
99. The Bureau of Labor Statistics defines marginally attached workers as persons who currently are neither working
nor looking for work but indicate that they want and are available for a job and have looked for work sometime in
the recent past.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Marginally attached workers
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
132 Chapter 20/Unemployment
100. The Bureau of Labor Statistics defines discouraged workers as marginally attached workers who have given a jobmarket related reason for not currently looking for a job.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Discouraged workers
MSC: Definitional
101. The Bureau of Labor Statistics U-1 measure of joblessness is smaller than its U-6 measure of joblessness.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Underutilization
MSC: Interpretive
102. The Bureau of Labor Statistics U-1 measure of joblessness is larger than its U-6 measure of joblessness.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Underutilization
MSC: Interpretive
103. The Bureau of Labor Statistics U-1 measure of joblessness includes only very long-term unemployed.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Underutilization
MSC: Interpretive
104. The Bureau of Labor Statistics U-2 measure of joblessness includes job losers and job leavers.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Underutilization
MSC: Interpretive
105. The Bureau of Labor Statistics U-3 measure of joblessness is the official unemployment rate.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Underutilization
MSC: Interpretive
106. The Bureau of Labor Statistics U-4 measure of joblessness includes discouraged workers.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Underutilization
MSC: Interpretive
107. The Bureau of Labor Statistics U-5 measure of joblessness is the official unemployment rate.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Underutilization
MSC: Interpretive
108. The Bureau of Labor Statistics U-5 measure of joblessness includes marginally attached workers.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Underutilization
MSC: Interpretive
109. Most spells of unemployment are short, and most unemployment observed at any given time is long-term.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment spells
MSC: Definitional
110. Most spells of unemployment are short, and most unemployment observed at any given time is short-term.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment spells
MSC: Definitional
111. Most spells of unemployment are long, and most unemployment observed at any given time is long-term.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment spells
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 133
112. Data on unemployment indicate that most people who become unemployed will soon find jobs.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment spells
MSC: Interpretive
113. Most spells of unemployment are long, and most unemployment observed at any given time is long-term.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment spells
MSC: Definitional
114. Most spells of unemployment are short. About half of unemployment spells end with an exit from the labor force.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment spells
MSC: Definitional
115. In an ideal labor market, wages would adjust to balance the quantity of labor supplied and the quantity of labor de manded, ensuring that all workers are always fully employed.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Labor markets
TOP: Labor market equilibrium
MSC: Definitional
116. There are always some workers without jobs, even when the overall economy is doing well.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Definitional
117. The unemployment rate never falls to zero.
ANS: T
DIF: 1
REF:
LOC: Unemployment and inflation
TOP:
MSC: Definitional
20-1
NAT: Analytic
Unemployment rate
118. One explanation for long-run unemployment is that it takes time for workers to search for the jobs that are best
suited for them.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Job search
MSC: Definitional
119. The unemployment that results from the process of matching workers and jobs is called frictional unemployment.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Definitional
120. The unemployment that results from the process of matching workers and jobs is called structural unemployment.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Definitional
121. Frictional unemployment is often thought to explain relatively short spells of unemployment.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Definitional
122. Frictional unemployment is often thought to explain relatively long spells of unemployment.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Definitional
123. Some long-run unemployment may be explained by the fact that the number of jobs available in some labor mar kets may be insufficient to give a job to everyone who wants one.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
134 Chapter 20/Unemployment
124. The unemployment that results from the quantity of labor supplied exceeding the quantity demanded is called
structural unemployment.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Definitional
125. The unemployment that results from the quantity of labor supplied exceeding the quantity demanded is called fric tional unemployment.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Definitional
126. Structural unemployment results when wages are, for some reason, set above the level that brings supply and de mand into equilibrium.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Definitional
127. Structural unemployment is often thought to explain relatively long spells of unemployment.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Definitional
128. Structural unemployment is often thought to explain relatively short spells of unemployment.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Definitional
129. Three possible reasons for an above-equilibrium wage are minimum-wage laws, unions, and efficiency wages.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Definitional
130. Every month, the Bureau of Labor Statistics surveys 160,000 business establishments to help determine the num ber of jobs the economy has gained or lost.
ANS: T
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Jobs numbers
MSC: Interpretive
131. The Bureau of Labor Statistics household survey and establishment survey both yield the same results about total
employment.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Jobs numbers
MSC: Interpretive
132. The Bureau of Labor Statistics household survey and establishment survey both yield information about unem ployment.
ANS: F
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Interpretive
133. One reason economies always experience some unemployment is job search.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Job search
MSC: Definitional
134. Job search is the process of matching workers with appropriate jobs.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Job search
MSC: Definitional
135. If all workers and all jobs were the same such that all workers were equally well suited for all jobs, then job search
would not be a problem.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Job search
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 135
136. If all workers and all jobs were the same such that all workers were equally well suited for all jobs, then there
would be no frictional unemployment.
ANS: T
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Interpretive
137. Frictional unemployment is often the result of changes in the demand for labor among different firms.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Definitional
138. The demand for labor by a certain firm fluctuates as the demand for that firms product fluctuates.
ANS: T
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Labor markets
TOP: Sectoral shifts
MSC: Interpretive
139. The demand for labor by a certain firm is independent of the demand for that firms product.
ANS: F
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Labor markets
TOP: Sectoral shifts
MSC: Interpretive
140. Employment can rise in one region of the country while it falls in another.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Sectoral shifts
MSC: Definitional
141. Changes in the composition of demand among industries or regions are called sectoral shifts.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Sectoral shifts
MSC: Definitional
142. Sectoral shifts temporarily cause unemployment.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Sectoral shifts
MSC: Definitional
143. Sectoral shifts contribute to frictional unemployment.
ANS: T
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Sectoral shifts
MSC: Interpretive
144. Sectoral shifts contribute to structural unemployment.
ANS: F
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Sectoral shifts
MSC: Interpretive
145. Frictional unemployment is inevitable because the economy is always changing.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Definitional
146. A century ago, the four industries with the largest employment in the United States were cotton goods, woolen
goods, mens clothing, and lumber.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment
MSC: Definitional
147. Today, the four industries with the largest employment in the United States are autos, aircraft, communications,
and electrical components.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
136 Chapter 20/Unemployment
148. Someone who loses his job at a truck factory because the demand for trucks has fallen and the demand for cars has
risen, is structurally unemployed.
ANS: F
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Definitional
149. Data show that at least 10 percent of U.S. manufacturing jobs are destroyed every year.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Definitional
150. Data show that at least 20 percent of U.S. manufacturing jobs are destroyed every year.
ANS: F
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Definitional
151. More than 3 percent of U.S. workers leave their jobs in a typical month.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Definitional
152. More than 30 percent of U.S. workers leave their jobs in a typical month.
ANS: F
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Definitional
153. The destruction of manufacturing jobs and workers leaving their jobs to find better ones both contribute to friction al unemployment.
ANS: T
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Interpretive
154. The destruction of manufacturing jobs and workers leaving their jobs to find better ones both contribute to structur al unemployment.
ANS: F
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment
MSC: Interpretive
155. Public policy can reduce the economys natural rate of unemployment.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Public policy | Natural rate of unemployment
MSC: Definitional
156. Public policy can reduce frictional unemployment.
ANS: T
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Public policy | Frictional unemployment
MSC: Interpretive
157. Policies that reduce the time it takes unemployed workers to find new jobs can reduce the economys natural rate
of unemployment.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Public policy | Natural rate of unemployment
MSC: Definitional
158. Government-run employment agencies and public training programs both seek to reduce frictional unemployment.
ANS: T
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Public policy | Frictional unemployment
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 137
159. Advocates of government-run employment agencies and public training programs believe they make job search
more efficient.
ANS: T
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Public policy
MSC: Interpretive
160. Critics of government-run employment agencies and public training programs argue that the private market is bet ter at matching workers and jobs than the government is.
ANS: T
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Public policy | Frictional unemployment
MSC: Interpretive
161. Most job search in the U.S. economy takes place without intervention by the government.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Public policy | Frictional unemployment
MSC: Definitional
162. Most job search in the U.S. economy takes place with the help of the government.
ANS: F
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Job search
MSC: Definitional
163. Public policy, without intending to do so, can increase frictional unemployment.
ANS: T
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Public policy | Frictional unemployment
MSC: Interpretive
164. An American worker who becomes unemployed typically receives 100% of her former salary during the first six
months she is unemployed.
ANS: F
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Definitional
165. Unemployment insurance increases frictional unemployment.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Definitional
166. Unemployment insurance reduces hardships of unemployment but also increases the amount of structural unem ployment.
ANS: F
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Interpretive
167. Unemployment insurance is designed to offer workers full protection against job loss.
ANS: F
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Definitional
168. The unemployed who quit their jobs, were fired for cause, or just entered the labor force are not eligible for unem ployment insurance.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Definitional
169. The unemployed who quit their jobs, were fired for cause, or just entered the labor force are eligible for unemploy ment insurance.
ANS: F
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
138 Chapter 20/Unemployment
170. A typical American worker covered by unemployment insurance receives 50 percent of his former wages for 52
weeks.
ANS: F
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Definitional
171. Unemployment insurance reduces the incentive for the unemployed to find and take new jobs.
ANS: T
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Interpretive
172. Unemployment insurance causes workers to be less likely to seek guarantees of job security when they negotiate
with employers over the terms of employment.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Definitional
173. Studies have shown that the design of the unemployment insurance system reduces the job search effort of the un employed.
ANS: T
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Interpretive
174. Some economists have argued that unemployment insurance improves the ability of the economy to match each
worker with the most appropriate job.
ANS: T
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Definitional
175. Most economists agree that eliminating unemployment insurance would increase the amount of unemployment in
the economy.
ANS: F
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Definitional
176. Most economists agree that eliminating unemployment insurance would increase the nations overall level of wellbeing.
ANS: F
DIF: 1
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Definitional
177. Other things the same, countries that offer more generous and longer-lasting unemployment insurance benefits are
likely to have higher unemployment rates.
ANS: T
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment insurance
MSC: Interpretive
178. Structural unemployment results when the number of jobs is insufficient for the number of workers.
ANS: T
DIF: 1
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Definitional
179. Minimum wages are the predominant reason for unemployment in the U.S. economy.
ANS: F
DIF: 1
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Minimum wage
MSC: Definitional
180. When a minimum-wage law forces the wage to remain above the level that balances supply and demand, the
quantity of labor supplied is higher and the quantity demanded of labor is lower than at the equilibrium wage.
ANS: T
DIF: 1
REF: 20-3
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage
MSC: Definitional
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 139
181. When a minimum-wage law forces the wage to remain above the level that balances supply and demand, the
quantity of labor supplied is lower and the quantity of labor demand is higher than at the equilibrium wage.
ANS: F
DIF: 1
REF: 20-3
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage
MSC: Definitional
182. When a minimum-wage law forces the wage to remain above the level that balances supply and demand, the result
is a surplus of labor.
ANS: T
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage
MSC: Interpretive
183. When a minimum-wage law forces the wage to remain above the level that balances supply and demand, the result
is a shortage of labor.
ANS: F
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage
MSC: Interpretive
184. When a minimum-wage law forces the wage to remain above the level that balances supply and demand, there are
more workers willing to work than there are jobs, so some workers are unemployed.
ANS: T
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Minimum wage
MSC: Interpretive
185. A minimum wage that is below the equilibrium wage rate does not raise unemployment.
ANS: T
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Minimum wage
MSC: Definitional
186. Minimum wage laws help explain the natural rate of unemployment if they create a surplus in any labor market.
ANS: T
DIF: 1
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Minimum wage
MSC: Definitional
187. Minimum-wage laws are one reason there is always some unemployment in the U.S. economy.
ANS: T
DIF: 1
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Minimum wage
MSC: Definitional
188. Minimum-wage laws affect all workers.
ANS: F
DIF: 2
LOC: Labor markets
MSC: Interpretive
REF:
TOP:
20-3
NAT: Analytic
Minimum wage
189. Most U.S. workers have wages well above the legal minimum, so minimum-wage laws do not prevent the wage
from adjusting to balance supply and demand.
ANS: T
DIF: 1
REF: 20-3
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage
MSC: Definitional
190. Minimum-wage laws matter most for the least skilled and least experienced members of the labor force, such as
teenagers.
ANS: T
DIF: 1
REF: 20-3
NAT: Analytic
LOC: Labor markets
TOP: Minimum wage
MSC: Definitional
191. It is only among the least skilled and least experienced members of the labor force that minimum-wage laws cause
unemployment.
ANS: T
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Minimum wage
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
140 Chapter 20/Unemployment
192. U.S. Department of Labor data show that minimum-wage workers tend to be young, less educated, more likely to
be working part time, and concentrated in the leisure and hospitality industry.
ANS: T
DIF: 1
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Minimum wage
MSC: Definitional
193. If the wage is kept above the equilibrium level for any reason, the result is unemployment.
ANS: T
DIF: 1
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Definitional
194. If the wage is kept above the equilibrium wage for any reason, the result is structural unemployment.
ANS: T
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Interpretive
195. If the wage is kept above the equilibrium level because of minimum-wage laws, then the result is unemployment;
if the wage is kept above the equilibrium level for some other reason, the result need not be unemployment.
ANS: F
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Structural unemployment
MSC: Interpretive
196. When job search is the explanation for unemployment, workers are searching for the jobs that best suit their tastes
and skills, but when the wage is above the equilibrium level, the quantity of labor supplied exceeds the quantity of
labor demanded, and workers are unemployed because they are waiting for jobs to open up.
ANS: T
DIF: 1
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Structural unemployment MSC: Definitional
197. A union is an employer association that bargains with workers over wages, benefits, and working conditions.
ANS: F
DIF: 1
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions MSC: Definitional
198. In the 1940s and 1950s, about one-third of U.S. workers belonged to unions, but today, only about one-fifth of U.S.
workers belong to unions.
ANS: F
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions MSC: Interpretive
199. Today, unions play a larger role in Europe than they do in the U.S.
ANS: T
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions MSC: Interpretive
200. When a union is present in a labor market, wages are not determined by the equilibrium of supply and demand.
ANS: T
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unions MSC: Interpretive
201. A union is a type of cartel.
ANS: T
DIF: 1
LOC: Labor markets
REF: 20-4
TOP: Unions MSC:
NAT: Analytic
Definitional
202. Like any cartel, a union is a group of sellers acting together in the hope of exerting their joint market power.
ANS: T
DIF: 1
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions MSC: Definitional
203. The process by which unions and firms agree on the terms of employment is called collective bargaining.
ANS: T
DIF: 1
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions | Collective bargaining
MSC: Definitional
204. If a union and a firm cannot reach an agreement on the terms of employment, then the union can organize a withdrawal of labor from the firm, called a strike.
ANS: T
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions | Strikes
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 141
205. Economists have found that union workers earn about 30 to 40 percent more than similar workers who do not belong to unions.
ANS: F
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions | Wages
MSC: Interpretive
206. When a union raises the wage above the equilibrium level, it reduces the quantity of labor supplied and raises the
quantity of labor demanded, resulting in unemployment.
ANS: F
DIF: 1
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions | Unemployment
MSC: Definitional
207. The introduction of a union into a firm benefits all of that firms workers.
ANS: F
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions MSC: Interpretive
208. Some of a firms workers are made worse off by the introduction of a union.
ANS: T
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions MSC: Interpretive
209. Unions are often thought to cause conflict between different groups of workers -- between the insiders who benefit
from high union wages and the outsiders who do not get the union jobs.
ANS: T
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions MSC: Interpretive
210. Unemployment generated by the existence of labor unions is structural unemployment and so contributes to the
natural rate of unemployment.
ANS: T
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions MSC: Definitional
211. When unions raise wages in one part of the economy, the supply of labor increases in other parts of the economy,
which reduces wages in industries that are not unionized.
ANS: T
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions MSC: Interpretive
212. Workers in unions reap the benefit of collective bargaining, while workers not in unions bear some of the cost.
ANS: T
DIF: 1
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions MSC: Definitional
213. Unions are exempt from U.S. antitrust laws.
ANS: T
DIF: 1
REF:
LOC: Labor markets
TOP:
MSC: Definitional
20-4
NAT: Analytic
Unions | Antitrust laws
214. In the U.S., it is illegal for employers to interfere when workers try to organize unions.
ANS: T
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions MSC: Interpretive
215. In the U.S., the National Labor Relations Board is the government agency that enforces workers right to unionize.
ANS: T
DIF: 1
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions | National Labor Relations Board
MSC: Definitional
216. Right-to-work laws give workers in a unionized firm the right to choose whether to join the union.
ANS: T
DIF: 1
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions | Right-to-work laws
MSC: Definitional
217. Right-to-work laws allow striking union members to be permanently replaced.
ANS: F
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions | Right-to-work laws
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
142 Chapter 20/Unemployment
218. Most economists believe unions are bad for the economy as a whole.
ANS: F
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions MSC: Interpretive
219. Critics of unions argue that unions cause the allocation of labor to be inefficient and inequitable.
ANS: T
DIF: 2
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions | Efficiency | Equality
MSC: Interpretive
220. Advocates of unions contend that unions are a necessary antidote to the market power of the firms that hire work ers and that unions are important for helping firms respond efficiently to workers concerns.
ANS: T
DIF: 1
REF: 20-4
NAT: Analytic
LOC: Labor markets
TOP: Unions MSC: Definitional
221. According to the theory of efficiency wages, firms operate more efficiently if wages are above the equilibrium
level.
ANS: T
DIF: 1
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Definitional
222. According to the theory of efficiency wages, firms operate more efficiently if wages are below the equilibrium
level.
ANS: F
DIF: 1
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Definitional
223. According to the theory of efficiency wages, it may be profitable for firms to keep wages high even in the presence
of a surplus of labor.
ANS: T
DIF: 1
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Definitional
224. Efficiency wages create structural unemployment.
ANS: T
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages | Structural unemployment
MSC: Interpretive
225. A firm might offer efficiency wages so its workers will eat a more nutritious diet and therefore be healthier and
more productive.
ANS: T
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages | Worker health
MSC: Interpretive
226. The efficiency-wage theory of worker health is more relevant for explaining unemployment in less developed
countries than in rich countries.
ANS: T
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages | Worker health
MSC: Interpretive
227. A firm might offer efficiency wages to reduce worker turnover and thereby reduce production costs.
ANS: T
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages | Worker turnover
MSC: Interpretive
228. A firm might offer efficiency wages in order to attract a better pool of applicants.
ANS: T
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages | Worker quality
MSC: Interpretive
229. A firm might offer efficiency wages in order to reduce shirking.
ANS: T
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages | Worker effort
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 143
230. In 1914, Henry Ford began paying his workers $5 per day, about twice the going wage. As a result, turnover and
absenteeism fell and productivity and profits rose.
ANS: T
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Interpretive
SHORT ANSWER
1. The table below uses data for the year 2003 provided by the Bureau of Labor Statistics and adjusted to be compar able to U.S. data. All values are in thousands. Fill in the blank entries in the table.
Country
Adult
Population
Labor
Force
Japan
France
Germany
109,474
70,159
26,870
39,591
Country
Adult
Population
Labor
Force
Employed
Unemployed
62,510
Unemployment
Rate
3,500
2,577
Labor-Force
Participation
Rate
57.41
9.69
ANS:
DIF:
TOP:
Employed
Unemployed
Unemployment
Rate
Labor-Force
Participation
Rate
Japan
109,474
66,010
62,510
3,500
5.30
60.30
France
46,804
26,870
24,293
2,577
9.59
57.41
Germany
70,159
39,591
35,755
3,836
9.69
56.43
2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
Labor force participation rate | Unemployment rate MSC: Applicative
2. Following the recession of 2001, there was a month in which employment and the unemployment rate both rose.
Assuming the computations were correct, how is it possible for both to have increased?
ANS:
The rate of unemployment is measured as the number of people unemployed divided by the labor force. If the
number of people in the labor force rises, but a significant portion of the rise in the labor force is people who are
unemployed, then both employment and unemployment could rise.
(This likely happened because as the economy was improving, more people began seeking employment, but not
all immediately found employment.)
DIF: 3
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Employment | Unemployment rate MSC: Analytical
3. Why have labor-force participation rates for women in the United States increased since World War II while laborforce participation rates for men have decreased?
ANS:
Causes of the increase in the U.S. womens labor-force participation rate over the past several decades include new
technologies that have reduced the amount of time required to complete routine household tasks, improved birth
control, and changing political and social attitudes. Causes of the decline in the U.S. mens labor-force
participation rate over the past several decades include young men now staying in school longer than their fathers
and grandfathers did, older men now retiring earlier and living longer, and more fathers now staying at home to
raise their children.
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Labor force participation rate
MSC: Interpretive
4. Most spells of unemployment are short, and most unemployment observed at any given time is long term. How
can this be?
ANS:
Most unemployed people in the economy are unemployed for relatively short periods of time, while fewer people
are unemployed for relatively long periods of time. If you were to total the weeks spent unemployed, most of those
weeks would be accounted for by people who had been unemployed a long time.
DIF: 2
REF: 20-1
NAT: Analytic
LOC: Unemployment and inflation
TOP: Unemployment
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
144 Chapter 20/Unemployment
5. Why might a favorable change in the economy, such as technological improvement or a decrease in the price of
imported oil, be associated with an increase in frictional unemployment?
ANS:
Even generally favorable changes will usually involve some sort of sectoral shock that changes the demand for
labor among different firms. For example, a decrease in the price of imported oil would likely reduce the demand
for U.S. oil workers and increase the demand for automobile workers. Similarly, technological progress makes
some industries decline and others advance, creating frictional unemployment.
DIF: 2
REF: 20-2
NAT: Analytic
LOC: Unemployment and inflation
TOP: Frictional unemployment | Sectoral shifts
MSC: Interpretive
6. Teenage unemployment is higher than unemployment of people ages 20 and over. Explain why economists would
attribute at least part of this difference to minimum-wage laws.
ANS:
People who are experienced and educated are likely to find jobs where the equilibrium wage is above the minimum
wage. In labor markets where the equilibrium wage is above the minimum wage, the minimum wage does not
create unemployment. Since people ages 20 and over tend to have more experience and education than teenagers,
the minimum wage matters less and so creates less unemployment.
DIF: 2
REF: 20-3
NAT: Analytic
LOC: Unemployment and inflation
TOP: Minimum wage | Unemployment MSC: Interpretive
7. Since unemployment rates are consistently higher in Canada and some Western European countries than in the
United States, it appears that the natural rate of unemployment is lower in the United States. What might explain
this difference?
ANS:
The text offers two explanations for the natural rate of unemployment. The first is frictional unemployment, which
results from people and employers taking time to search for the best match. Frictional unemployment would be
higher in countries that have frequent and large sectoral shifts and generous unemployment compensation. It
seems unlikely that Canada and Western European countries would have greater sectoral shifts than the United
States, so some of the difference might be due to more generous unemployment compensation in Canada and
Western Europe.
The second explanation for the natural rate of unemployment is that wages in some labor markets are above
equilibrium. One rationale for setting wages above equilibrium is to attract and retain productive workers. There
is no obvious reason why these efficiency wages should contribute to unemployment more in Canada and Western
Europe than in the United States. Wages can also be above equilibrium in some markets because of minimumwage laws. So, some unemployment in Canada and Western Europe might result from higher minimum wages.
Finally, unions may negotiate higher wages for their members causing a rise in unemployment. Canada and
Western Europe have greater union membership rates and more powerful unions.
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Unemployment and inflation
TOP: Natural rate of unemployment
MSC: Interpretive
8. Suppose that there is an excess supply of economics professors. Should universities necessarily reduce salaries?
What does standard economic theory suggest? What does efficiency-wage theory suggest?
ANS:
Standard economic theory suggests that if universities are interested in maximizing profits or minimizing costs,
they should reduce salaries until the quantity supplied of workers is equal to the quantity demanded. The reduction
in wages would reduce the costs of production and raise profits while still allowing universities to fill faculty
positions.
Efficiency-wage theory suggests that it might be profitable for universities to keep wages above the equilibrium
level in order to reduce worker turnover, increase worker quality, increase worker effort (reduce shirking) and
therefore worker productivity. (Fortunately, salaries of economics professors are usually a bit above what is
necessary to eat nutritious diets, so the worker-health variant of the efficiency wage is not likely to be important
here.)
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 20/Unemployment 145
9. What is the theory of efficiency wages? Provide four reasons that employers might pay efficiency wages.
ANS:
According to the theory of efficiency wages, firms operate more efficiently if wages are above the equilibrium
level. Therefore, it may be profitable for firms to keep wages high even in the presence of an excess supply of
labor. If so, firms will keep wages above the equilibrium level, creating unemployment.
(1) Worker Health:
Better-paid workers eat a more nutritious diet, and workers who eat a better diet are healthier and more productive.
A firm may find it profitable to pay higher wages in order to have healthier, more productive workers.
(2) Worker Turnover:
The more a firm pays its workers, the less often its workers choose to leave the firm. Since it is costly to hire and
train new workers, it may be profitable for an employer to pay higher than equilibrium wages in order to reduce
worker turnover rates.
(3) Worker Effort:
In jobs where workers have some discretion over how hard they work, workers may shirk. As a result, firms
monitor the effort of their workers, and those caught shirking are fired. However, it is costly to monitor workers,
and monitoring is often imperfect. By paying higher wages, firms make it more expensive for workers to shirk,
since if they are caught they will not readily find other employment at their current wage. It may be profitable for a
firm to pay higher than market wages in order to reduce shirking.
(4) Worker Quality:
When a firm hires new workers, it cannot perfectly gauge the quality of the applicants. By paying a higher wage,
the firm attracts a better pool of workers to apply for its jobs. It may be profitable for a firm to pay higher than
market wages in order to increase the probability that it will hire good-quality workers.
DIF: 2
REF: 20-5
NAT: Analytic
LOC: Labor markets
TOP: Efficiency wages
MSC: Interpretive
2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.