Deck 28: The Labor Market in the Macroeconomy

Question 1

Employment tends to fall when

A) aggregate output falls.
B) unemployment rises.
C) aggregate output rises.
D) labor productivity falls.

Answer 1

aggregate output falls.

Question 2

The number unemployed divided by the labor force is the

A) unemployment rate.
B) civilian population.
C) per-capita employment rate.
D) discouraged worker total.

Answer 2

unemployment rate.

Question 3

If a country has a population of 300 million, 135 million people employed and 15 million people looking for work, then its unemployment rate is

A) 5%.
B) 10%.
C) 15%.
D) 35%.

Answer 3

10%.

Question 4

If you hear a person saying "I lost my job at a call center because my employer has outsourced all customer service to India," you should conclude that this person is ________ unemployed.

A) cyclically
B) structurally
C) frictionally
D) seasonally

Question 5

Structural unemployment

A) arises from the time it takes employers to find appropriate employees.
B) is most likely to arise from a recession.
C) is less severe during economic downturns.
D) is most likely to arise as a result of technological changes.

Question 6

Structural unemployment

A) arises from recessions.
B) is due to changes in the structure of the economy.
C) arises from the time it takes employers to find appropriate employees.
D) is due to seasonal changes.

Question 7

The type of unemployment that arises during recessions is known as

A) the natural rate of unemployment.
B) cyclical unemployment.
C) structural unemployment.
D) frictional unemployment.

Question 8

The unemployment rate is

A) the number unemployed divided by the labor force.
B) the number unemployed divided by the number employed.
C) the number unemployed divided by the population.
D) the difference between the population and the number employed divided by the population.

Question 9

The type of unemployment that is most likely to arise as a result of technological changes is

A) cyclical unemployment.
B) seasonal unemployment.
C) frictional unemployment.
D) structural unemployment.

Question 10

The type of unemployment that is due to changes in the structure of the economy is

A) adjustable unemployment.
B) structural unemployment.
C) frictional unemployment.
D) cyclical unemployment.

Question 11

If a country has a population of 400 million, 160 million people employed and 40 million people looking for work, then its unemployment rate is

A) 10%.
B) 20%.
C) 25%.
D) 40%.

Question 12

The functioning of the labor market primarily affects the shape of the

A) aggregate demand curve.
B) money demand curve.
C) aggregate supply curve.
D) planned investment curve.

Question 13

Economists define the labor force to include

A) only people who are working full-time.
B) people who are working.
C) people who are not working but are actively looking for a job, and people who are working.
D) all individuals of work age, regardless of whether they are working or looking for a job.

Question 14

The labor force includes those people with a job and

A) those people who are looking for work.
B) those people training for a job.
C) those people who formerly worked and are now retired.
D) homemakers.

Question 15

Employment tends to rise when

A) aggregate output falls.
B) unemployment rises.
C) aggregate output rises.
D) labor productivity falls.

Question 16

Cyclical unemployment

A) arises from recessions.
B) is due to changes in the structure of the economy.
C) arises from the time it takes employers to find appropriate employees.
D) is due to seasonal changes.

Question 17

Which of the following would be likely to lead to a decrease in the natural rate of unemployment?

A) an increase in the number of teenage workers in the workforce
B) a decrease in the length of time during which people can receive unemployment benefits
C) a prolonged recession
D) all of the above

Question 18

If you hear a person saying "I lost my job because I was replaced by a machine," you should conclude that this person is ________ unemployed.

A) cyclically
B) structurally
C) frictionally
D) seasonally

Question 19

If you hear a person saying "I just relocated to this city after graduating from college and have yet to find an acceptable job in my field," you should conclude that this person is ________ unemployed.

A) cyclically
B) structurally
C) frictionally
D) seasonally

Question 20

If you hear a person saying "I lost my job at the GM plant because car manufacturing is slow due to a slowdown in the economy," you should conclude that this person is ________ unemployed.

A) cyclically
B) structurally
C) frictionally
D) seasonally

Question 21

The unemployment rate will never be zero because the economy is dynamic and always changing.

Question 22

According to classical economists, excessive unemployment does not persist in the economy because

A) wages will always adjust to ensure equilibrium in the labor market.
B) the labor demand does not change in the economy.
C) the labor supply does not change in the economy.
D) interest rates always change to insure equilibrium in the money market.

Question 23

Cyclical unemployment is that which rises in recessions and shrinks during expansions.

Question 24

In the recession of 2008-2009, the unemployment rate rose to over 10 percent.

Question 25

Sally stopped looking for work six months ago, so she would not be a part of the labor force.

Question 26

Refer to the information provided in Figure 28.1 below to answer the question(s) that follow. Figure 28.1
Refer to Figure 28.1. At wage rate $15, there is a ________ of labor equal to ________ million people.

A) surplus; 150
B) shortage; 150
C) shortage; 120
D) surplus; 120

Question 27

Frictional and structural unemployment usually decrease during recessions.

Question 28

Frictional unemployment is the type that arises due to recessions.

Question 29

Refer to the information provided in Figure 28.1 below to answer the question(s) that follow. Figure 28.1
Refer to Figure 28.1. The equilibrium wage rate is $________ and the equilibrium number of people employed is ________ million people.

A) 15; 270
B) 9; 210
C) 15; 150
D) 6; 180

Question 30

If the quantity of labor demanded and the quantity of labor supplied are brought into equilibrium by rising and falling wage rates, there should be no persistent unemployment and the unemployment rate should be zero.

Question 31

If a person is not employed but is looking for work, she is in the labor force.

Question 32

Structural unemployment arises when the economy changes making some jobs obsolete.

Question 33

A decline in the demand for labor means the unemployment rate must rise.

Question 34

According to classical economists, the only types of unemployment that exist in an economy are

A) structural and frictional unemployment.
B) cyclical and frictional.
C) seasonal and cyclical.
D) frictional and seasonal.

Question 35

If a household member is not in the labor force, it is because he or she has decided his or her time is more valuable in nonmarket activities.

Question 36

Refer to the information provided in Figure 28.1 below to answer the question(s) that follow. Figure 28.1
Refer to Figure 28.1. At wage rate $6, there is a ________ of labor equal to ________ million people.

A) shortage; 180
B) shortage; 60
C) surplus; 180
D) surplus; 60

Question 37

Employment tends to fall when aggregate output falls.

Question 38

To be unemployed, a person must be without a job and actively looking for work.

Question 39

The unemployment rate is the fraction of the labor force without a job.

Question 40

Changes in the ________ market affect the shape of the short run aggregate supply curve.

A) money
B) labor
C) goods
D) financial

Question 41

Which of the following may shift the labor demand curve?

A) an increase in the value of leisure
B) a decrease in the value of leisure
C) more people entering the labor force
D) an increase in the value of output that firms produce

Question 42

Refer to the information provided in Figure 28.1 below to answer the question(s) that follow. Figure 28.1
Refer to Figure 28.1. At a wage rate of $9, there is a ________ of labor equal to ________ million people.

A) surplus; 210
B) shortage; 210
C) surplus; 120
D) None of the above are correct.

Question 43

Doug is currently not employed. He places a value of $16 an hour on his time in nonmarket activities. If Doug is offered a job paying $12 an hour

A) he should supply 0 hours in the labor market.
B) he should supply a positive number of hours in the labor market and allocate no time to nonmarket activities.
C) he is indifferent between supplying hours to the labor market and using his time in nonmarket activities.
D) he should supply a positive number of hours in the labor market and to nonmarket activities.

Question 44

Refer to the information provided in Figure 28.1 below to answer the question(s) that follow. Figure 28.1
Refer to Figure 28.1. Which of the following can change the equilibrium wage rate from $9 to $6?

A) The value people put on their leisure time increases.
B) The value of what firms produce increases.
C) The productivity of workers decreases.
D) The productivity of workers increases.

Question 45

Refer to the information provided in Figure 28.1 below to answer the question(s) that follow. Figure 28.1
Refer to Figure 28.1. According to classical economists if the wage rate is $6, the wage rate will ________ to eliminate the ________.

A) decline; surplus
B) increase; shortage
C) decline; shortage
D) increase; surplus

Question 46

A decrease in worker productivity

A) reduces the demand for labor.
B) increases the demand for labor.
C) reduces the supply of labor.
D) increases the supply of labor.

Question 47

Which of the following may shift the labor supply curve?

A) an increase in worker productivity
B) a decrease in the value people place on their time
C) an increase in the price of the output of the firm
D) an increase in the corporate tax rate

Question 48

Refer to the information provided in Figure 28.1 below to answer the question(s) that follow. Figure 28.1
Refer to Figure 28.1. If the productivity of workers decreases, the equilibrium wage rate

A) could change from $9 to $6.
B) could change from $9 to $15.
C) would stay at $15.
D) would increase to $15.

Question 49

Refer to the information provided in Figure 28.1 below to answer the question(s) that follow. Figure 28.1
Refer to Figure 28.1. Which of the following can change the equilibrium wage rate from $9 to $15?

A) The value people put on their leisure time increases.
B) The value of what firms produce decreases.
C) The productivity of workers decreases.
D) the value of what firms produce increases.

Question 50

Martin is not employed. The value Martin places on his leisure time is $30 an hour. Martin looks for a job and all the offers he has are for less than $30 an hour. Martin should supply

A) exactly 40 hours per week in the labor market.
B) between 0 and 20 hours per week in the labor market.
C) between 20 and 40 hours per week in the labor market.
D) 0 hours in the labor market.

Question 51

Refer to the information provided in Figure 28.1 below to answer the question(s) that follow. Figure 28.1
Refer to Figure 28.1. At a wage rate of $________, there is a surplus of labor equal to ________ million people.

A) 6; 60
B) 6; 180
C) 15; 150
D) 15; 120

Question 52

An increase in the productivity of workers shifts the labor ________ curve to the ________.

A) supply; left
B) supply; right
C) demand; right
D) demand; left

Question 53

Refer to the information provided in Figure 28.1 below to answer the question(s) that follow. Figure 28.1
Refer to Figure 28.1. According to classical economists, if the wage rate is $15 the wage rate will ________ to eliminate the ________.

A) decline; surplus
B) decline; shortage
C) increase; surplus
D) increase; shortage

Question 54

Which of the following may shift the labor supply curve?

A) an increase in the wage rate
B) an increase in the value people place on their time
C) an increase in the price of the output of the firm
D) an increase in the corporate tax rate

Question 55

Lisa is currently not employed. She places a value of $12 an hour on her time in nonmarket activities. If Lisa is offered a job paying $17 an hour

A) she should supply 0 hours in the labor market and allocate all of her time to nonmarket activities.
B) she should supply a positive number of hours in the labor market and allocate no time to nonmarket activities.
C) she should supply a positive number of hours in the labor market and to nonmarket activities.
D) she is indifferent between supplying hours to the labor market and using her time in nonmarket activities.

Question 56

Refer to the information provided in Figure 28.1 below to answer the question(s) that follow. Figure 28.1
Refer to Figure 28.1. If the value people put on their leisure time increases, the equilibrium wage rate

A) could change from $9 to $6.
B) could change from $9 to $15.
C) would stay at $15.
D) would increase to $15.

Question 57

The government lowers the marginal income tax rates so that after-tax wages are increased. This most likely will shift the labor

A) supply curve to the right.
B) supply curve to the left.
C) demand curve to the right.
D) demand curve to the left.

Question 58

Refer to the information provided in Figure 28.1 below to answer the question(s) that follow. Figure 28.1
Refer to Figure 28.1. At a wage rate of $________, there is a shortage of labor equal to ________ million people.

A) 6; 60
B) 6; 180
C) 15; 150
D) 15; 120

Question 59

A new policy is implemented that guarantees every adult an annual income of $10,000 whether they work or not. This will most likely shift the

A) labor demand curve to the right.
B) labor supply curve to the left.
C) labor supply curve to the right.
D) labor demand curve to the left.

Question 60

John is contemplating whether he should take a job offered to him. John should

A) not take the job if the value of his leisure is less than the wage rate the job pays.
B) not take the job if the value of his leisure is greater than the wage rate the job pays.
C) not take the job if taking the job implies he will enjoy less leisure.
D) take the job if taking the job implies he will enjoy more leisure.

Question 61

One of the tenets of the classical view of the labor market is that the ________ adjustments are necessary to clear the labor market.

A) wage
B) price
C) interest rate
D) all of the above

Question 62

One of the tenets of the classical view of the labor market is that the wage adjustments that are necessary to clear the labor market

A) occur very infrequently.
B) occur quickly.
C) don't occur.
D) occur slowly.

Question 63

If a policy is implemented that reduces unemployment benefits by 50 percent and reduces by 50 percent the time the unemployed can collect these benefits, then this would most likely shift the

A) labor demand curve to the left.
B) labor supply curve to the right.
C) labor supply curve to the left.
D) labor demand curve to the right.

Question 64

If a new governmental policy increases unemployment benefits, we would expect the labor ________ curve to shift to the ________.

A) supply; right
B) demand; right
C) supply; left
D) demand; left

Question 65

According to the classical economists, those who are not working

A) have chosen not to work at the market wage.
B) are too productive to be hired at the current wage.
C) are unable to find a job at the current wage rate.
D) have given up looking for a job, but would accept a job at the current wage if one were offered to them.

Question 66

The government raises the marginal income tax rates so that after-tax wages are decreased. This most likely will shift the labor

A) supply curve to the right.
B) supply curve to the left.
C) demand curve to the right.
D) demand curve to the left.

Question 67

If a new governmental policy decreases unemployment benefits, we would expect the labor ________ curve to shift to the ________.

A) supply; right
B) demand; right
C) supply; left
D) demand; left

Question 68

If firms start offering more employment benefits, such as more stock options and a better dental plan, we would expect the labor ________ curve to shift to the ________.

A) demand; right
B) demand; left
C) supply; right
D) supply; left

Question 69

An increase in the value people place on their actual time spent working will shift the labor ________ curve to the ________.

A) supply; right
B) supply; left
C) demand; right
D) demand; left

Question 70

An increase in worker productivity

A) reduces the demand for labor.
B) increases the demand for labor.
C) reduces the supply of labor.
D) increases the supply of labor.

Question 71

According to the classical theory, an expansionary monetary policy ________ the price level and ________ output in the long run.

A) decreases; increases
B) increases; doesn't change
C) increases; increases
D) doesn't change; doesn't change

Question 72

The classical view of the labor market is basically consistent with the assumption of ________ aggregate supply curve.

A) a horizontal (or almost horizontal)
B) a downward-sloping
C) an upward-sloping
D) a vertical (or almost vertical)

Question 73

A decrease in the productivity of workers shifts the labor ________ curve to the ________.

A) supply; left
B) supply; right
C) demand; right
D) demand; left

Question 74

According to ________ economists, the only types of unemployment that exist in an economy are structural and frictional unemployment.

A) classical
B) Keynesian
C) monetarist
D) Marxist

Question 75

Classical economists believe that the aggregate supply curve is vertical because

A) wages are flexible and they always change to clear the labor market.
B) the labor market is always in equilibrium.
C) people who are not working are those who have chosen not to work at the prevailing wage rate.
D) all of the above.

Question 76

A decrease in the value people place on their actual time spent working will shift the labor ________ curve to the ________.

A) supply; right
B) supply; left
C) demand; right
D) demand; left

Question 77

What definition of unemployment would you expect classical economists to use?

A) anyone who is actively seeking work
B) anyone who is willing to work if the market wage increases
C) anyone who is willing to work at the current market wage, but has not yet been able to find employment
D) anyone who is currently not working

Question 78

According to classical economists, ________ unemployment does not persist in the economy because wages will always adjust to ensure equilibrium in the labor market.

A) excessive
B) structural
C) frictional
D) the natural rate of

Question 79

The shape of the short run aggregate supply curve is impacted by changes in the

A) money market.
B) labor market.
C) goods market.
D) financial market.

Question 80

Those who believe that wages adjust quickly to clear the labor market also believe that

A) the AS curve is upward sloping.
B) the AD curve is steep.
C) the AD curve is flat.
D) the AS curve is vertical.