Deck 6: Unemployment

Question 1

Frictional unemployment is inevitable because:

A) different sectors do not shift.
B) the economy needs to be lubricated.
C) workers never quit their jobs to change careers.
D) the demand for different goods always fluctuates.

Answer 1

the demand for different goods always fluctuates.

Question 2

Sectoral shifts:

A) lead to wage rigidity.
B) explain the payment of efficiency wages.
C) depend on the level of the minimum wage.
D) make frictional unemployment inevitable.

Answer 2

make frictional unemployment inevitable.

Question 3

Unemployment caused by the time it takes workers to search for a job is called ______ unemployment.

A) frictional
B) structural
C) efficiency
D) insider

Answer 3

frictional

Question 4

One reason for unemployment is that:

A) it takes time to match workers and jobs.
B) all jobs are identical.
C) the labour market is always in equilibrium.
D) a laid-off worker can immediately find a new job at the market wage.

Question 5

If the number of employed workers equals 20 million and the number of unemployed workers equals 2 million,the unemployment rate equals ______ percent (rounded to the nearest percent).

A) 0
B) 9
C) 10
D) 20

Question 6

The macroeconomic problem that affects individuals most directly and severely in the short run is:

A) inflation.
B) unemployment.
C) low savings.
D) low investment.

Question 7

Economists call the changes in the composition of demand among industries and regions:

A) insider-outsider conflicts.
B) sectoral shifts.
C) moral hazard.
D) adverse selection.

Question 8

All of the following are reasons for frictional unemployment except:

A) workers have different preferences and abilities.
B) unemployed workers accept the first job offer that they receive.
C) the flow of information is imperfect.
D) geographic mobility takes time.

Question 9

If the steady-state rate of unemployment equals 0.10 and the fraction of employed workers who lose their jobs each month (the rate of job separation)is 0.02,then the fraction of unemployed workers who find jobs each month (the rate of job findings)must be:

A) 0.02.
B) 0.08.
C) 0.10.
D) 0.18.

Question 10

Frictional unemployment is unemployment caused by:

A) wage rigidity.
B) minimum-wage legislation.
C) the time it takes workers to search for a job.
D) clashes between the motives of insiders and outsiders.

Question 11

Any policy aimed at lowering the natural rate of unemployment must either ______ the rate of job separation or ______ the rate of job finding.

A) reduce; reduce
B) increase; increase
C) reduce; increase
D) increase; reduce

Question 12

Which of the following is an example of frictional unemployment?

A) Dave searches for a new job after voluntarily moving to Winnipeg.
B) Elaine is willing to work for less than the minimum wage,but employers cannot hire her.
C) Bill is qualified and would like to be an airline pilot,but airlines do not find it profitable to hire him at the wage established by the airline pilot's union.
D) Joan is willing to work at the going wage,but there are no jobs available.

Question 13

The natural rate of unemployment is:

A) the average rate of unemployment around which the economy fluctuates.
B) about 10 percent of the labour force.
C) a rate that never changes.
D) the transition of individuals between employment and unemployment.

Question 14

If the steady-state rate of unemployment equals 0.125 and the fraction of unemployed workers who find jobs each month (the rate of job findings)is 0.56,then the fraction of employed workers who lose their jobs each month (the rate of job separations)must be:

A) 0.08.
B) 0.125.
C) 0.22.
D) 0.435.

Question 15

The natural rate of unemployment in Canada since 1950 has averaged between ______ percent and ______ percent.

A) 0; 2
B) 2; 4
C) 4; 9
D) 10; 12

Question 16

In the model of the steady-state unemployment rate with a fixed labour force,the rate of job finding equals the percentage of the ______ who find a job each month,while the rate of job separation equals the percentage of the ______ who lose their job each month.

A) labour force; labour force
B) labour force,unemployed
C) employed,labour force
D) unemployed,employed

Question 17

If s is the rate of job separation,f is the rate of job finding,and both rates are constant,then the unemployment rate is approximately:

A) f/(f + s).
B) (f + s)/f.
C) s/(s + f).
D) (s + f)/s.

Question 18

The unemployment rate in Canada since 1950 has:

A) never been close to zero.
B) gravitated toward a steady-state rate of zero.
C) remained constant from year to year.
D) equaled the natural rate of unemployment in every year.

Question 19

In a steady state:

A) no hiring or firings are occurring.
B) the number of people finding jobs equals the number of people losing jobs.
C) the number of people finding jobs exceeds the number of people losing jobs.
D) the number of people losing jobs exceeds the number of people finding jobs.

Question 20

If the fraction of employed workers who lose their jobs each month (the rate of job separation)is 0.01 and the fraction of the unemployed who find a job each month is 0.09 (the rate of job findings),then the natural rate of unemployment is:

A) 1 percent.
B) 9 percent.
C) 10 percent.
D) about 11 percent.

Question 21

Employment insurance increases the amount of frictional unemployment by:

A) making workers more frantic in their search for new jobs.
B) inducing workers to accept the first job offer that they receive.
C) making employers more reluctant to lay off workers.
D) softening the economic hardship of unemployment.

Question 22

The unemployment resulting when real wages are held above equilibrium is called ______ unemployment,while the unemployment that occurs as workers search for a job that best suits their skills is called ______ unemployment.

A) efficiency; inefficiency
B) efficiency; structural
C) frictional; efficiency
D) structural; frictional

Question 23

Most current employment-insurance programs in the western world are:

A) paid for fully by governments.
B) more generous than the Canadian system.
C) 100 percent experience rated.
D) partially experience rated.

Question 24

If wage rigidity holds the real wage above the equilibrium level,an increase in the demand for labour will ______ the number unemployed.

A) increase
B) decrease
C) not change
D) possibly increase,decrease,or leave unchanged

Question 25

Government policies directed at reducing frictional unemployment include:

A) abolishing minimum-wage laws.
B) making employment insurance 100 percent experience rated.
C) increasing the earned income credit.
D) making government part of the union-firm wage bargaining process.

Question 26

The employment insurance system may be desirable because unemployment insurance:

A) raises the natural rate of unemployment.
B) reduces the rate of job finding.
C) increases workers' uncertainty about their incomes.
D) induces workers to reject unattractive job offers.

Question 27

If wage rigidity holds the real wage above the equilibrium level,an increase in the supply of labour will ______ the number unemployed.

A) increase
B) decrease
C) not change
D) possibly increase,decrease,or leave unchanged

Question 28

One study that compared provincial minimum wage laws found that BC and Alberta had the ________ ratio of youth-to-total unemployment,and these provinces had the _______ minimum wage laws.

A) highest; lowest
B) highest; highest
C) lowest; lowest
D) lowest; highest

Question 29

Which of the following is the best example of structural unemployment?

A) Tim is looking for a job with flexible hours,but has not been offered one yet.
B) Vickie lost her job as a graphic artist at a movie studio because she did not have training in computer-generated animation.
C) Kirby is seeking a job as an airline pilot,but the high union wages in the industry have limited the number of jobs available.
D) Fatima lost her job at a packing plant,but has not looked very intensively for a new job because she still has two months of unemployment insurance benefits left.

Question 30

All of the following are causes of structural unemployment except:

A) minimum-wage laws.
B) the monopoly power of unions.
C) employment insurance.
D) efficiency wages.

Question 31

A typical worker in Canada who is covered by employment insurance receives ______ percent of his or her former wages for ______ weeks.

A) 50; 26
B) 50; 52
C) 67; 26
D) 67; 52

Question 32

The unemployment resulting from wage rigidity and job rationing is called ______ unemployment.

A) frictional
B) structural
C) minimum-wage
D) insider

Question 33

All of the following policies were adopted by government in an attempt to reduce the natural rate of unemployment except:

A) employment insurance.
B) government employment agencies.
C) public retraining programs.
D) bonus programs for employment insurance claimants who found jobs quickly.

Question 34

When there is structural unemployment,the real wage is:

A) rigid at a level below the market-clearing level.
B) rigid at the market-clearing level.
C) rigid at a level above the market-clearing level.
D) flexible.

Question 35

According to studies of individual unemployed workers,these workers are most likely to find a job:

A) about three months before their employment insurance runs out.
B) within a few weeks of their employment insurance running out.
C) about three months after their employment insurance runs out.
D) at a time not influenced by the remaining number of weeks of employment insurance.

Question 36

When the real wage is above the level that equilibrates supply and demand:

A) the quantity of labour supplied exceeds the quantity demanded.
B) the quantity of labour demanded exceeds the quantity supplied.
C) there is no unemployment.
D) the labour market clears.

Question 37

The minimum wage:

A) is usually about 75 percent of the average wage earned in manufacturing.
B) raises the wages of highly skilled workers.
C) encourages master workers to take on apprentices.
D) has its greatest impact on teenage unemployment.

Question 38

Wage rigidity:

A) forces labour demand to equal labour supply.
B) is caused by sectoral shifts.
C) prevents labour demand and labour supply from reaching the equilibrium level.
D) increases the rate of job finding.

Question 39

Public policy to increase the job finding rate includes ______,and public policy to decrease the job separation rate includes ______.

A) government employment agencies; higher unemployment insurance benefits
B) job training programs; 100 percent experience-rated unemployment insurance
C) higher minimum wage laws; payment of unemployment benefits for longer periods
D) higher efficiency wages; partial experience-rated unemployment insurance

Question 40

Firms currently have incentives to temporarily lay off workers because firms typically are charged for ______ of workers' employment-insurance benefits.

A) all
B) only a part
C) none
D) twice the cost

Question 41

Suppose that over the course of a year 100 people are unemployed for four weeks each (the short-term unemployed),while 10 people are unemployed for 52 weeks each (the long-term unemployed).Approximately what percentage of the total weeks of unemployment were attributable to the long-term unemployed?

A) 9 percent
B) 10 percent
C) 43.5 percent
D) 56.5 percent

Question 42

Centralized union wage bargaining with government intervention in Sweden gives relatively more influence to ______,while firm-level union wage bargaining in Canada gives relatively more influence to ______.

A) efficiency wages; sectoral shifts
B) sectoral shifts; efficiency wages
C) insiders; outsiders
D) outsiders; insiders

Question 43

Unions contribute to structural unemployment when collective bargaining results in wages:

A) above the equilibrium level.
B) below the minimum wage.
C) below the equilibrium level.
D) above the level of employment insurance benefits.

Question 44

In the case of unions,the conflict of interest between different groups of workers results in insiders wanting ______,while outsiders want ______.

A) more hirings; high wages
B) high wages; more hirings
C) high wages; fewer hirings
D) fewer hirings; high wages

Question 45

By paying efficiency wages,firms contribute to higher structural unemployment because they:

A) increase the wage bill.
B) make workers more productive.
C) keep the wage below the equilibrium level.
D) keep the wage above the equilibrium level.

Question 46

Suppose that over the course of a year 100 people are unemployed for four weeks each (the short-term unemployed),while 10 people are unemployed for 52 weeks each (the long-term unemployed).Approximately what percentage of the total spells of unemployment were attributable to the long-term unemployed?

A) 9 percent
B) 10 percent
C) 43.5 percent
D) 56.5 percent

Question 47

Economists who have studied minimum-wage laws in Canada find that a 10 percent increase in the minimum wage increases teenage unemployment by about:

A) 10 to 30 percent.
B) 5 percent.
C) 1 to 3 percent.
D) 0 percent.

Question 48

When insiders have a much greater impact on the wage bargaining process than do outsiders,the negotiated wage is likely to be ______ the equilibrium wage.

A) much greater than
B) much less than
C) almost equal to
D) about one-half of

Question 49

The percentage of workers who belong to unions in Canada is approximately:

A) 13 percent.
B) 23 percent.
C) 33 percent.
D) 43 percent.

Question 50

A possible explanation for the fact,that before the recession of 2008-2009,Canada has had a much higher unemployment rate than does the United States is that:

A) Canada's employment insurance is less generous.
B) unionization has increased in the United States.
C) unionization has decreased in Canada.
D) unionization has remained higher in Canada.

Question 51

Paying efficiency wages helps firms reduce the problem of adverse selection by:

A) generating additional profits that can be used to pay for more proficient hiring managers.
B) keeping labour unions from organizing workers in the firm.
C) encouraging unsupervised workers to maintain a high level of productivity.
D) providing an incentive for the best-qualified workers to remain with the firm.

Question 52

The earned income tax credit:

A) increases the government's tax revenue.
B) reduces the incomes of poor working families.
C) does not raise labour costs.
D) is not an alternative to raising the minimum wage.

Question 53

Paying efficiency wages helps firms reduce the problem of moral hazard by:

A) generating additional profits that can be used to improve working conditions.
B) keeping labour unions from organizing workers in the firm.
C) encouraging unsupervised workers to maintain a high level of productivity.
D) providing an incentive for the best-qualified workers to remain with the firm.

Question 54

Efficiency-wage theories suggest that a firm may pay workers more than the market-clearing wage for all of the following reasons except to:

A) reduce labour turnover.
B) improve the quality of the firm's labour force.
C) increase worker effort.
D) reduce the firm's wage bill.

Question 55

When Henry Ford paid his workers $5 per day when the prevailing wage was between $2 and $3 a day:

A) it greatly increased his company's costs.
B) workers reduced their work efforts because they felt they "had it made."
C) Ford proved the efficiency-wage theory was wrong.
D) it raised the efficiency of his workers.

Question 56

Permitting a lower minimum wage for teenagers would likely:

A) raise teenage unemployment.
B) raise teenage wages overall.
C) prevent teenagers from getting job experience.
D) raise unemployment among unskilled adults.

Question 57

All of the following statements about minimum-wage workers are correct except:

A) Minimum-wage workers are more likely to be male.
B) Minimum-wage workers are more likely to work part time.
C) Minimum-wage workers are more likely to be less educated.
D) Minimum-wage workers are more likely to be young.

Question 58

One efficiency-wage theory implies that firms pay high wages because:

A) this practice increases the problem of moral hazard.
B) in wealthy countries,it is important to pay workers high wages to improve their health.
C) the more a firm pays its workers,the greater their incentive to stay with the firm.
D) paying high wages promotes adverse selection.

Question 59

According to efficiency-wage theories,firms benefit by paying higher-than-equilibrium wages because worker _____ increases.

A) productivity
B) turnover
C) unionization
D) shirking

Question 60

When outsiders have a greater role than do insiders in the wage bargaining process,the negotiated wage is likely to be ______ the equilibrium wage.

A) much greater than
B) much less than
C) much closer to
D) about twice

Question 61

Policies to substantially reduce unemployment should be targeted at:

A) the short-term unemployed.
B) the long-term unemployed
C) discouraged workers.
D) insiders and outsiders.

Question 62

Most spells of unemployment are ______ term and most weeks of unemployment are attributable to ______-term unemployment.

A) short; short
B) short; long
C) long; long
D) long; short

Question 63

During the past 50 years the natural rate of unemployment in Canada ______ during the 1970s and 1980s,compared with the 1950s and 1960s,and then ______ during the 1990s,compared with the previous two decades.

A) increased; increased
B) increased; decreased
C) decreased; decreased
D) decreased; increased

Question 64

Transitions into and out of the labour force:

A) rarely occur.
B) do not affect unemployment statistics.
C) make unemployment statistics difficult to interpret.
D) reduce the amount of frictional unemployment.

Question 65

In 2012,the unemployment rate in Newfoundland and Labrador was ______ that in Alberta.

A) twice
B) half
C) roughly equal to
D) almost three times

Question 66

As the relative demand for unskilled workers falls,wages for unskilled workers ______ and unemployment compensation becomes a ______ attractive option.

A) fall; more
B) fall; less
C) rise; more
D) rise; less

Question 67

Many economists attribute part of the recent increase in European unemployment to:

A) high birthrates.
B) slow rates of technological change.
C) generous benefits for unemployed workers.
D) increased demand for unskilled workers.

Question 68

The recent reduced demand for unskilled workers relative to skilled workers has led to ______ for unskilled workers in Europe compared with ______ for unskilled workers in the United States.

A) unemployment; lower wages
B) lower wages; unemployment
C) more unionization; efficiency wages
D) efficiency wages; more unionization

Question 69

All of the following are possible explanations for the trends in the Canadian unemployment rate in the last half of the twentieth century except:

A) the changing composition of the Canadian work force.
B) sectoral shifts.
C) a generally increasing real value of the minimum wage.
D) the links between unemployment and productivity.

Question 70

The sectoral shifts explanation for changes in the Canadian natural rate of unemployment over the past 50 years rests on the idea that oil-price volatility ______ the rate of job ______.

A) increased; separation
B) decreased; separation
C) increased; findings
D) decreased; findings

Question 71

Unemployment would decline in the face of rising productivity if:

A) real wages only increased sluggishly.
B) real wages adjusted instantaneously.
C) labour supply remained fixed in the face of increases in labour demand.
D) the demand for labour did not respond to the rising productivity.

Question 72

In recent years,the highest unemployment rates in Canada have been in the ________ age bracket.

A) 15-19
B) 20-24
C) 45-54
D) 55-64

Question 73

A spell of unemployment begins when a person leaves his or her job or:

A) withdraws from the labour force.
B) enters the labour force.
C) takes a vacation.
D) has been without a job for at least four weeks.

Question 74

The demographic explanation for the changes in the Canadian natural rate of unemployment over the past 50 years rests on the idea that:

A) younger workers have higher rates of unemployment.
B) younger workers have lower rates of unemployment.
C) baby-boom workers were more productive than other workers because they had greater access to technology.
D) baby-boom workers had higher than usual rates of job finding.

Question 75

European unemployment rates are positively correlated with all of the following except:

A) the percentage of the previous wage replaced by employment insurance.
B) the percentage of the labour force that is unionized.
C) the length of the period during which employment-insurance benefits can be collected.
D) the amount of coordination among employers in bargaining with unions.

Question 76

Short-term unemployment is most likely to be ______ unemployment,while long-term unemployment is most likely to be ______ unemployment.

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

Question 77

In Canada,about ______ of any increase in the unemployment rate is due to longer unemployment spells (longer duration)and about _________ of any increase in the unemployment rate is due to more people becoming unemployed (higher incidence).

A) two-thirds; one-third
B) one-third; two-thirds
C) one-fifth; four-fifths
D) four-fifths; one-fifth

Question 78

Discouraged workers are individuals who:

A) have jobs that do not match their skills (e.g.,a Ph.D.driving a taxi cab).
B) have been unemployed for more than 26 weeks.
C) call themselves unemployed but are not seriously looking for a job.
D) want a job but have given up looking for one.

Question 79

Discouraged workers are counted as:

A) part of the labour force.
B) out of the labour force.
C) employed.
D) unemployed.

Question 80

Spells of unemployment end when the unemployed person finds a job or:

A) withdraws from the labour force.
B) enters the labour force.
C) runs out of employment insurance benefits.
D) refuses to answer the labour force survey questions.