Deck 31: Unemployment Fluctuations and the Nairu

Question 1

When the growth rate of the labour force is greater than the growth rate of total employment, the unemployment rate

A)increases.
B)is below NAIRU.
C)decreases.
D)is equal to NAIRU.
E)is above NAIRU.

Answer 1

A

Question 2

The total amount of unemployment in the economy is constant when the flows of individuals

A)into unemployment exceed the flows out of unemployment.
B)out of unemployment are equal to the flows into unemployment.
C)out of unemployment are negative.
D)into unemployment are positive.
E)out of unemployment exceed the flows into unemployment.

Answer 2

B

Question 3

One motivation for having publicly subsidized retraining programs is to

A)encourage employment in low- paying jobs.
B)resist adjustment to technological change.
C)reduce structural unemployment.
D)encourage the use of efficiency wages.
E)reduce cyclical unemployment.

Answer 3

C

Question 4

Economic models in which the NAIRU can be influenced by changes in the actual rate of unemployment are said to include

A)hysteresis.
B)rational expectations.
C)labour- market clearing.
D)demographic shifts.
E)efficiency- wage behaviour.

Question 5

The table below shows real GDP, potential GDP and the unemployment rate for a hypothetical economy. TABLE 31- 1
Refer to Table 31- 1. The variations in the unemployment rate between 2003 and 2011 are due to variations in

A)potential output.
B)structural unemployment.
C)frictional unemployment.
D)the NAIRU.
E)the output gap.

Question 6

According to 2008 data, unemployment rates for females are unemployment rates for males for any given age group; and unemployment rates for youths (age 15- 24)are unemployment rates for all other age groups.

A)lower than; lower than
B)higher than; lower than
C)lower than; higher than
D)higher than; higher than
E)equal to; higher than

Question 7

Many economists believe that the more strict rules for qualifying for employment- insurance benefits introduced by the federal government in the early 1990s have led to

A)higher frictional unemployment.
B)higher structural unemployment.
C)lower structural unemployment.
D)lower cyclical unemployment.
E)lower frictional unemployment.

Question 8

New Classical theories of the labour market argue that

A)all unemployment is most easily corrected by government intervention in the economy.
B)competitive labour markets can be relied upon to eliminate all unemployment.
C)labour unions are necessary elements in reducing unemployment.
D)all unemployment arises from firms being unwilling to demand labour services.
E)labour markets will clear and involuntary unemployment will thereby be eliminated.

Question 9

The total amount of unemployment in the economy rises when the flows of individuals

A)into unemployment exceed the flows out of unemployment.
B)out of unemployment are negative.
C)out of unemployment are equal to the flows into unemployment.
D)into unemployment are positive.
E)out of unemployment exceed the flows into unemployment.

Question 10

The best description of the cause of "cyclical" unemployment is that

A)workers often voluntarily quit a job to look for a better job.
B)some individuals do not have marketable skills for the jobs that do exist.
C)firms engage in race, gender and sex discrimination in their hiring practices.
D)the AD curve shifts to the left.
E)the level of overall economic activity falls below its potential level.

Question 11

An unemployed worker can be identified as being "frictionally" unemployed if

A)the worker quits a job in order to search for a better one.
B)the worker has a different set of skills than what is desired by firms.
C)the worker wants to work only during certain months of the year.
D)minimum wage laws prevent the worker from finding a job.
E)there is a recession and the worker is laid off.

Question 12

When the actual unemployment rate is equal to the NAIRU, we can say that

A)frictional and structural unemployment are both zero.
B)frictional unemployment is zero.
C)the economy is experiencing no lost output due to frictional unemployment.
D)all remaining unemployment is structural.
E)the economy is at full employment.

Question 13

Which of the following policies could the government implement to reduce cyclical unemployment?

A)expansionary monetary policy
B)contractionary monetary policy
C)a national "job bank" listing available jobs throughout the country
D)relocation allowances to move unemployed people around the country
E)retraining programs for chronically unemployed people

Question 14

The table below shows real GDP, potential GDP and the unemployment rate for a hypothetical economy. TABLE 31- 1
Some economists argue that increases in labour- force participation rates by young people and females in the 1970s and 1980s caused

A)an increase in NAIRU.
B)a decrease in frictional unemployment.
C)a decrease in NAIRU.
D)an increase in cyclical unemployment.
E)a decrease in cyclical unemployment.

Question 15

What economists sometimes call "voluntary unemployment" occurs when

A)a person is willing to accept a job at the going wage rate but cannot find one.
B)a worker is not willing to accept an available job at the going wage rate.
C)the level of real GDP is at or above the economy's potential output.
D)a worker enters the job market for the first time.
E)a job is available but the worker has not yet found it.

Question 16

Suppose a free- trade agreement with Central America eliminates all tariffs on imported textiles from those countries. Which type of unemployment will be affected in Canada?

A)frictional unemployment
B)structural unemployment
C)seasonal unemployment
D)hidden unemployment
E)cyclical unemployment

Question 17

"Efficiency wages" are said to exist when wages are

A)high enough above market levels that workers increase their productivity.
B)equal to the market wage.
C)such that the NAIRU is zero.
D)such that cyclical unemployment is zero.
E)just high enough to induce a worker to take a job.

Question 18

Other things being equal, improvements in the efficiency of labour markets that make it easier for firms to advertise prospective jobs and which reduce the effort of workers to search for jobs will

A)increase NAIRU.
B)increase frictional unemployment.
C)increase structural unemployment.
D)decrease cyclical unemployment.
E)decrease frictional unemployment.

Question 19

Which of the following statements best explains why unemployment rates in European countries are significantly higher than unemployment rates in Canada or the United States?

A)European countries have higher- paying jobs than Canada or the U.S., which causes an influx of workers into the labour force, which then increases the unemployment rate.
B)The Canadian and the U.S. economies are more heavily unionized than European countries.
C)Workers in European countries have less skills and training than North American workers and therefore have higher rates of unemployment.
D)European countries have experienced more recessionary gaps than Canada or the U.S. and therefore have significantly higher cyclical unemployment.
E)Canada and the U.S. have greater labour- market flexibility than European countries.

Question 20

An unemployed worker can be identified as being "structurally" unemployed if

A)the worker wants to work only during certain months of the year.
B)the worker quits a job in order to search for a better one.
C)there is a recession and the worker is laid off.
D)the worker has a different set of skills than what is desired by firms.
E)minimum wage laws prevent the worker from finding a job.

Question 21

The ongoing process of globalization of the world economy has an effect on the NAIRU in Canada. Choose the statement that best describes the likely effect.

A)Since globalization has brought net economic benefits to Canada, it follows that the NAIRU must be decreasing.
B)Because Canada is experiencing greater trade with the rest of the world, the increasing demand for exports puts upward pressure on the demand for labour in Canada and thus tends to decrease the NAIRU.
C)Canadian labour markets increasingly need to adjust to changing supply and demand conditions around the world. These ongoing adjustments tend to increase the NAIRU.
D)Canada's labour market is increasingly connected to labour markets in other parts of the world and the NAIRU in Canada tends to adjust to the same levels as those of our trading partners.
E)Globalization has meant that Canadian labour markets are less exposed to economic fluctuations elsewhere in the world, which has decreased the NAIRU.

Question 22

An unemployed worker can be identified as being "cyclically" unemployed if

A)the worker has a different set of skills than what is desired by firms.
B)the worker quits a job in order to search for a better one.
C)there is an economic downturn and the worker is laid off.
D)minimum wage laws prevent the worker from finding a job.
E)the worker wants to work only during certain months of the year.

Question 23

Which of the following best explains why a certain amount of unemployment may be socially desirable?

A)A pool of unemployed workers drives down the average wage in the economy, and keeps workers from becoming greedy.
B)A pool of unemployed workers provides an incentive to those employed to remain productive.
C)Unemployed workers have the time to upgrade their skills and training.
D)When some workers become unemployed it provides a chance to others in the labour force to become employed.
E)The time spent unemployed by the worker is valuable for finding the most appropriate match with firms.

Question 24

Which of the following policies could the government implement to reduce frictional unemployment

A)contractionary monetary policy
B)expansionary monetary policy
C)a national "job bank" listing available jobs throughout the country
D)relocation allowances to move unemployed people around the country
E)retraining programs for chronically unemployed people

Question 25

Suppose there are 2000 unemployed textile workers in Quebec and 2000 vacant positions in the Alberta Tar Sands. We say that this unemployment is

A)hysteresis.
B)frictional.
C)efficient.
D)structural.
E)cyclical.

Question 26

The economy in the diagram below begins in long- run equilibrium at E₀.
FIGURE 31- 2
Refer to Figure 31- 2. At E₀, the unemployment rate is 5.6 percent. An increase in the price of raw materials shifts the AS curve to AS₁ and a new short- run equilibrium is established at E₁. At E₁, the unemployment rate is 7 percent. Therefore,

A)the economy is at full employment.
B)cyclical unemployment is negative.
C)the sum of frictional and structural unemployment is 7 percent.
D)the NAIRU is 7 percent.
E)cyclical unemployment is 1.4 percent.

Question 27

If there were an increase in the share of the labour force that is unionized, it would likely lead to wage flexibility, which would the NAIRU.

A)less; not change
B)less; decrease
C)more; decrease
D)less; increase
E)more; increase

Question 28

A likely consequence of firms paying "efficiency wages" is

A)lower real wages for employed workers.
B)decreased unemployment.
C)more competitive labour markets.
D)increased unemployment.
E)rapid wage adjustment in the face of labour- market changes.

Question 29

Suppose that next year 300 000 existing jobs in the economy are eliminated and 200 000 new jobs are created. The amount of unemployment will decline over that year if

A)more than 300 000 people join the labour force.
B)less than 100 000 people join the labour force.
C)less than 100 000 people drop out of the labour force.
D)more than 100 000 people drop out of the labour force.
E)more than 100 000 people join the labour force.

Question 30

New Classical theories suggest that fluctuations in employment and wages can be caused by the supply side of the labour market through changes in the

A)willingness of firms to hire workers.
B)marginal efficiency of investment.
C)level of net exports in the economy.
D)willingness of workers to supply their labour.
E)price level.

Question 31

If labour markets had perfectly flexible wages, as the New Classical theories suggest, involuntary unemployment would

A)rise when the labour demand curve shifts to the left.
B)rise when the labour supply curve shifts to the right.
C)rise when the labour supply curve shifts to the left.
D)rise when the labour demand curve shifts to the right.
E)not exist.

Question 32

In macroeconomic theories of national- income determination, short- run changes in real GDP are typically associated with changes in unemployment.

A)frictional
B)voluntary
C)efficiency- wage
D)cyclical
E)structural

Question 33

A central argument of New Keynesian theories of unemployment is that

A)labour markets will clear and unemployment will thereby be eliminated.
B)monetary policy is rarely effective at reducing unemployment.
C)even competitive labour markets cannot be relied upon to eliminate involuntary unemployment.
D)all unemployment is caused by government intervention in the economy.
E)all unemployment arises from firms being unwilling to hire extra workers.

Question 34

Suppose that unemployed workers searching to replace their lost jobs become discouraged and eventually decide to give up the search. Such a decision

A)has no effect on the official unemployment rate.
B)decreases the official unemployment rate.
C)increases the NAIRU.
D)increases the official unemployment rate.
E)decreases the NAIRU.

Question 35

Which statement by an employer is consistent with the New Classical theory of unemployment?

A)"I pay only enough to attract workers who are at the bottom of the pay scale."
B)"Workers can always find jobs, if only they lower their expectations."
C)"I pay more than the going rate so I can hire good workers."
D)"I love it when inflation goes up because that drives down my wage costs."
E)"Unions have only their current members' interests at heart."

Question 36

New Classical theories of the labour market feature wages, and thus involuntary unemployment .

A)sticky; exists
B)perfectly flexible; does not exist
C)perfectly flexible; exists
D)sticky; does not exist

Question 37

Unemployment rates among workers in the 15- 24 age group tend to be _ _ the overall unemployment rate. An influx of workers of this age group into the labour force would tend to the NAIRU.

A)higher than; increase
B)higher than; decrease
C)lower than; decrease
D)the same as; not change
E)lower than; increase

Question 38

A good example of an outcome that could lead to "hysteresis" in the labour market is:

A)new entrants to the labour market have difficulty finding jobs, and as a result have a higher rate of unemployment throughout their working lives.
B)new entrants to the labour market have a high rate of unemployment due to technological change.
C)a negative demand shock persists.
D)a negative supply shock persists.
E)unemployment is generated by an increase in the minimum wage.

Question 39

Suppose John finishes school and immediately gets a part- time job. The measured unemployment rate would

A)fall because he was not in the labour force when in school.
B)not change since he is now employed.
C)rise because he was not in the labour force when in school.
D)fall because he was considered unemployed when in school.
E)not change because part- time jobs aren't counted in the labour force.

Question 40

New Keynesian theories of the labour market feature _ wages, and thus involuntary unemployment .

A)perfectly flexible; can exist
B)sticky; cannot exist
C)sticky; can exist
D)perfectly flexible; cannot exist
E)efficiency wages; cannot exist

Question 41

Frictional unemployment in Canada has decreased in recent years because

A)labour- market flexibility in Canada has decreased.
B)the labour- force participation rate for men has been falling.
C)the benefits received under the employment- insurance system have become less generous.
D)the labour- force participation rate for women has been falling.
E)workers have higher levels of education and training.

Question 42

When the total number of unfilled job openings in the economy is equal to the total number of persons unemployed, is zero.

A)involuntary unemployment
B)structural unemployment
C)frictional unemployment
D)cyclical unemployment
E)the NAIRU

Question 43

New Classical theories of the labour market assume that labour markets

A)always clear.
B)will always provide a subsistence wage.
C)are inefficient.
D)should be regulated to produce an efficient wage rate.
E)have asymmetrically rigid wages.

Question 44

If there are more job vacancies in the economy than there are unemployed workers, then it is likely that

A)there is excessive involuntary unemployment in this economy.
B)fiscal policy aimed at increasing aggregate demand would cause the actual unemployment rate to move toward the NAIRU.
C)there is no structural unemployment in this economy.
D)the economy has a high NAIRU.
E)the actual unemployment rate is less than the NAIRU.

Question 45

An important New Keynesian explanation for the existence of involuntary unemployment is that labour markets exhibit

A)perfectly flexible wages.
B)unshifting labour demand.
C)rigid or sticky wages.
D)an elastic labour demand curve.
E)unshifting labour supply.

Question 46

Suppose that in PetroLand the oil fields in the western region suddenly stop producing, causing oil companies to shift activities to their fields in the eastern region. This is bound to cause some unemployment in the western region of the country's economy.

A)structural
B)efficiency- wage
C)voluntary
D)frictional
E)cyclical

Question 47

An increase in the rate of aggregate economic growth usually the rate of change in the structure of labour demand, and thus tends to NAIRU .

A)slows down; increase
B)slows down; decrease
C)speeds up; have no effect on
D)speeds up; decrease
E)speeds up; increase

Question 48

Suppose in a given month the flow out of unemployment equals 300 000 per month, and the flow into unemployment equals 330 000 per month. The rate of unemployment has

A)decreased by 10 percent.
B)-- not enough information to determine.
C)decreased by 30 000.
D)increased by 10 percent.
E)increased by 30 000.

Question 49

Which of the following statements about frictional unemployment is most accurate?

A)Its source is a mismatch between the needs of employers with job vacancies and the unemployed workers.
B)Its source is that unemployed workers and the employers with job vacancies have not yet found each other.
C)It exists when only there are no jobs for the unemployed people in the economy.
D)The only way to reduce it is to shift the AD curve to the left.
E)The only way to reduce it is to shift the AD curve to the right.

Question 50

The normal turnover of workers and the usual time it takes to find a satisfactory job causes unemployment to persist even at potential GDP.

A)involuntary
B)structural
C)frictional
D)cyclical
E)excess

Question 51

Another name for "frictional" unemployment is

A)structural unemployment.
B)search unemployment.
C)recessional unemployment.
D)real- wage unemployment.
E)economic unemployment.

Question 52

The economy in the diagram below begins in long- run equilibrium at E₀.
FIGURE 31- 2
Refer to Figure 31- 2. Suppose the economy is in a short- run equilibrium at E₁ after a negative supply shock. Cyclical unemployment at E₁ can be reduced by

A)increasing taxes to cause the AD curve to shift to AD₁ and a new equilibrium at E₂.
B)a contractionary monetary policy that shifts the AS curve back to AS₀, returning the economy to equilibrium at E0.
C)an expansionary monetary policy that shifts the AD curve to AD₁ and a new equilibrium at E₂.
D)reducing government purchases to cause the AD curve to shift to AD₁ and a new equilibrium at E₂.
E)expanding education and training programs for unemployed workers.

Question 53

The main difference between New Classical and New Keynesian models of the economy is

A)the long- run path of output.
B)the long- run path of wages.
C)the degree of wage and price flexibility in the short run.
D)the long- run path of employment.
E)the tendency for output to return to potential in the long run.

Question 54

The labour market in the diagram below begins in equilibrium with a real wage of $10 and quantity employed of 1000.
FIGURE 31- 1
Refer to Figure 31- 1. Given the labour supply and labour demand curves, D₀ and S₀, which of the following statements is true in the New Classical theory of unemployment?

A)At any wage below $10, there is an excess demand for labour, and the wage will be driven down.
B)At any wage above $10, there is an excess demand for labour, and the wage will be driven down.
C)At any wage above $10, there is persistent, involuntary unemployment.
D)At any wage below $10, there is an excess supply of labour, and the wage will be driven up.
E)At any wage above $10, there is an excess supply of labour, and the wage will be driven down.

Question 55

The theory of "efficiency wages" suggests that a pool of involuntarily unemployed workers

A)is irrelevant to the behaviour of employed workers.
B)is comprised solely of workers who have failed to meet the productivity standards of potential employers.
C)provides an incentive for employees to work hard so they are not laid off.
D)exists only between sessions of wage re- negotiation.
E)quickly disappears because perfectly- flexible wages eliminates this inefficient waste of resources.

Question 56

When aggregate output is greater than potential output, the unemployment rate the NAIRU.

A)falls below
B)rises toward but never exceeds
C)is equal to
D)rises above
E)falls toward

Question 57

Other things being equal, when changes in technology cause some industries to decline and other industries to expand the result is

A)a decrease in cyclical unemployment.
B)an increase in NAIRU.
C)an increase in structural unemployment.
D)an increase in frictional unemployment.
E)a decrease in NAIRU.

Question 58

The total amount of unemployment in the economy decreases when the flows of individuals

A)out of unemployment exceed the flows into unemployment.
B)into unemployment exceed the flows out of unemployment.
C)out of unemployment are negative.
D)into unemployment are positive.
E)out of unemployment are equal to the flows into unemployment.

Question 59

The table below shows real GDP, potential GDP and the unemployment rate for a hypothetical economy. TABLE 31- 1
Refer to Table 31- 1. In which years is this economy operating at full employment?

A)2004 only
B)2004 and 2008
C)2005 only
D)2006 only
E)2005 and 2011

Question 60

If, as the New Classical theories suggest, all labour markets had perfectly flexible wages, real wages would rise when labour demand

A)rises and rise when labour supply rises.
B)rises and fall when labour supply rises.
C)rises and fall when labour supply falls.
D)falls and falls when labour supply rises.
E)falls and rise when labour supply falls.

Question 61

Which statement by an employer is consistent with the efficiency wage theory?

A)"I pay more than the going rate so that my employees work hard."
B)"Workers can always find jobs, if only they lower their expectations."
C)"I love it when unemployment goes up because that drives down my wage costs."
D)"I pay only enough to attract workers who are at the bottom of the pay scale."
E)"Unions have only their current members' interests at heart."

Question 62

If the actual unemployment rate is one percentage point less than the NAIRU, then

A)actual GDP is less than potential GDP.
B)actual and potential GDP are equal.
C)potential GDP will contract until it equals actual GDP.
D)actual GDP is greater than potential GDP.
E)potential GDP will expand permanently.

Question 63

One reason that economists are interested in gross flows in the labour market as well as in the stock of unemployment is that examining the gross flows

A)provides a better indication of the total number of people unemployed at any one time.
B)in relation to the stock of unemployment can indicate the amount of time the average person spends unemployed.
C)gives a better estimate of NAIRU.
D)excludes only the new entrants and retirements of people moving into and out of the labour force.
E)gives a good estimate of the incidence of unemployment.

Question 64

Technological changes over time have caused workers who produced such things as slide rules, eight- track music tapes, and manual typewriters to become unemployed, at least until they could be re- employed in other industries.

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

Question 65

One reason that economists are interested in the gross flows in the labour market as well as the stocks of unemployed is that examining the flows

A)provides a good estimate of the overall level of employment.
B)provides the only reliable way to measure cyclical unemployment.
C)gives us a better estimate of NAIRU.
D)provides a better indication of the total number of people unemployed at any one time rather than just looking at the stocks.
E)gives more insight into the amount of labour- market turnover.

Question 66

The NAIRU is likely to be affected by all of the following EXCEPT:

A)employment insurance.
B)globalization.
C)a demographic shift.
D)recession.
E)labour- market flexibility.

Question 67

The kind of unemployment that results from actual real GDP being less than potential GDP is known as unemployment.

A)natural
B)voluntary
C)frictional
D)cyclical
E)structural

Question 68

Which of the following would be the most appropriate policy for reducing cyclical unemployment?

A)introduction of programs for the retraining and relocation of labour
B)reduced benefits for workers covered by employment insurance
C)a decrease in the money supply
D)increased benefits for workers covered by employment insurance
E)a combination of tax cuts and increased government spending

Question 69

The theory of "efficiency wages" provides

A)many firms with a good reason to dismiss workers.
B)a way in which firms can pay workers less than the market- clearing wage.
C)most workers with a good reason to quit.
D)one explanation for why wages do not readily fall in response to excess supply in labour markets.
E)an explanation for the high wages that unions are able to extract from firms.

Question 70

The wage rate is slow to adjust when there are long- term employment relationships.

A)1, 2, and 3
B)2 and 3
C)1 and 2
D)2 only
E)3 only

Question 71

The concept of "full employment" refers to a situation in which there exists

A)an unemployment rate of less than 5 percent.
B)no job vacancies at the time.
C)a measured unemployment rate of zero.
D)only involuntary unemployment.
E)only structural and/or frictional unemployment.

Question 72

The table below shows real GDP, potential GDP and the unemployment rate for a hypothetical economy. TABLE 31- 1
Refer to Table 31- 1. What is the NAIRU in this economy?

A)7.0%
B)6.2%
C)5.9%
D)6.4%
E)6.1%

Question 73

Suppose that next year 300 000 existing jobs in the economy are eliminated through layoffs and plant closures, and 400 000 new jobs are created through expansions and the creation of new firms. The amount of unemployment will rise over that year if

A)less than 100 000 people join the labour force.
B)more than 100 000 people drop out of the labour force.
C)more than 300 000 people drop out of the labour force.
D)less than 100 000 people drop out of the labour force.
E)more than 100 000 people join the labour force.

Question 74

Empirical observation of employment and real- wage fluctuations over the business cycle in Canada and other developed countries

A)shows that real wages are volatile and employment levels are not.
B)supports the New Classical theory that labour markets always clear.
C)shows that employment is volatile and real wages are not.
D)is not able to refute the New Classical theory of unemployment.
E)supports the New Classical theory that there is no involuntary unemployment.

Question 75

Long- term labour contracts are an important feature of _ _ macroeconomic theories. In contrast to a world with continuous bargaining of wages and employment, the existence of such contracts leads to a labour market in which involuntary unemployment is .

A)New Keynesian; impossible
B)New Classical; always present
C)New Classical; impossible
D)New Classical; possible
E)New Keynesian; possible

Question 76

Wage contracts are often set for periods of up to three years. As a result, fluctuations in aggregate demand and aggregate supply tend to

A)cause changes in the amount of involuntary unemployment.
B)either increase or decrease the NAIRU.
C)clear the labour market.
D)have no effect in labour markets until wages are renegotiated.
E)cause greater inflexibility of wages.

Question 77

In macroeconomic models, the idea that NAIRU can be influenced by the actual rate of unemployment is referred to as

A)ludicrous.
B)hysteresis.
C)rational expectations.
D)the Phillips curve.
E)efficiency- wage unemployment.

Question 78

Suppose the NAIRU in April, 2010 is 7.2 percent. If the actual unemployment rate is 8.1 percent, then

A)there is an inflationary gap.
B)the NAIRU has increased by 0.9 percentage points.
C)0.9 percentage points are due to cyclical factors.
D)the sum of frictional and structural unemployment is greater than the NAIRU.
E)cyclical unemployment is 8.1 percent.

Question 79

When one worker is unemployed for one year,

A)we no longer include that worker in labour- force statistics.
B)the output that the worker would have produced is lost forever.
C)it is not a problem because as soon as the worker is employed again, any loss of output goes away.
D)there may be significant personal costs, but there is no cost to the economy.
E)there is no effect on national income.

Question 80

Other things being equal, a macroeconomic shock that leads to an inflationary output gap results in

A)a decrease in frictional unemployment.
B)a decrease in cyclical unemployment.
C)an increase in NAIRU.
D)a decrease in structural unemployment.
E)a decrease in NAIRU.