Question 1

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.

Accepted Answer

Globalization requires Canadian labor markets to continuously adapt to global supply and demand changes, which can lead to increased friction and structural unemployment, thus potentially raising the NAIRU (Non-Accelerating Inflation Rate of Unemployment).

Question 2

Unemployment rates in Canada and the United States have been lower than those in Europe for many years.A generally accepted explanation for this trend is that

Accepted Answer

Labour-market flexibility is greater in North America than in Europe, which allows for easier hiring and firing of employees, making it easier for companies to quickly adjust to changes in the economy.

Question 3

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.

Accepted Answer

Unemployment rates among workers in the 15-24 age group tend to be higher than the overall unemployment rate. An influx of workers of this age group into the labour force would tend to increase the NAIRU (Non-Accelerating Inflation Rate of Unemployment), as it would increase the supply of labour and potentially reduce wage pressures.

Question 4

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

Accepted Answer

The NAIRU (Non-Accelerating Inflation Rate of Unemployment) is a concept in economics that represents the level of unemployment below which inflation is expected to rise. It is influenced by factors that affect the supply and demand for labor, such as demographic shifts, employment insurance, globalization, and labor-market flexibility. However, a recession is a short-term economic downturn and does not directly affect the long-term structural factors that determine the NAIRU.

Question 5

Which of the following statements best explains why unemployment rates in European countries have tended to be higher than unemployment rates in Canada or the United States? (Note: this statement refers not to the current recession in Europe but to a longer-term average.)

Accepted Answer

Labour-market flexibility refers to the ability of employers to adjust to changes in supply and demand in the labour market, such as by easily hiring and firing workers or adjusting wages. Canada and the U.S. are generally considered to have more flexible labour markets than European countries, which can lead to lower rates of unemployment. European countries often have stricter labour laws and regulations that make it more difficult for employers to adjust their workforce, thereby contributing to higher levels of unemployment.

Question 6

The table below shows real GDP,potential GDP and the unemployment rate for a hypothetical economy.  TABLE 30-3
-Refer to Table 30-3.In which year is the cyclical unemployment equal to 0.3%?

Accepted Answer

The answer of The table below shows real GDP,potential GDP...

Question 7

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

Accepted Answer

The answer of Many economists believe that the more strict...

Question 8

In some European countries,labour-market policies make it very costly for firms to lay off or fire workers.Theory and evidence tells us that

Accepted Answer

Labour-market policies that make it costly for firms to lay off or fire workers reduce labour-market flexibility and tend to increase unemployment. This is because firms are less willing to hire new workers if they know they will have a hard time letting them go if demand for their products or services dries up. As a result, these policies may help workers keep their jobs during an economic downturn, but they also make it harder for new workers to enter the labour force and become productive. In the long run, this can lead to higher unemployment and lower wages. The European experience is more consistent with the insider-outsider theory of unemployment, which suggests that protective labour-market policies benefit insiders (i.e., those with jobs) but hurt outsiders (i.e., those who are looking for work).

Question 9

A decrease in the share of the labour force that is unionized may ________ the degree of wage flexibility, which would put ________ pressure on NAIRU.

Accepted Answer

An increase in wage flexibility, which can result from a decrease in unionization, typically puts downward pressure on the Non-Accelerating Inflation Rate of Unemployment (NAIRU) because it allows wages to adjust more easily to changes in the labor market, potentially reducing unemployment.

Question 10

The table below shows the percentage of the labour force accounted for by males and females over a two-decade period.Assume that real GDP is equal to potential in each of the given years.  TABLE 30-4
-Refer to Table 30-4.Suppose that for each year listed the unemployment rate among males is 5% while it is 7% among females.What is the economyʹs NAIRU in 1960?

Accepted Answer

The answer of The table below shows the percentage of...

Question 11

The table below shows the percentage of the labour force accounted for by males and females over a two-decade period.Assume that real GDP is equal to potential in each of the given years.  TABLE 30-4
-Refer to Table 30-4.Suppose that for each year listed the unemployment rate among males is 5% while it is 7% among females.What is the economyʹs NAIRU in 1975?

Accepted Answer

The answer of The table below shows the percentage of...

Question 12

The table below shows the percentage of the labour force accounted for by males and females over a two-decade period.Assume that real GDP is equal to potential in each of the given years.  TABLE 30-4
-Refer to Table 30-4.Suppose that for each year listed the unemployment rate among males is 5% while it is 7% among females.By how much does this economyʹs NAIRU change between 1960 and 1975?

Accepted Answer

The answer of The table below shows the percentage of...

Question 13

Many economists believe that long-run economic growth is best promoted by structural change,such as with a policy of .

Accepted Answer

Resisting structural change can lead to a stagnant economy, while adapting to structural change can foster innovation and growth. However, simply adapting to structural change may leave some individuals or industries behind, which is why it is important to also assist with retraining and relocation. Subsidizing failing industries may provide temporary relief, but ultimately may not be sustainable for long-term growth. Contractionary monetary policy, which involves decreasing money supply in order to slow down the economy, would likely hinder economic growth.

Question 14

The table below shows real GDP,potential GDP and the unemployment rate for a hypothetical economy.  TABLE 30-3
-Refer to Table 30-3.In which years is this economy operating at full employment?

Accepted Answer

An economy is considered to be at full employment when the actual unemployment rate is equal to the natural rate of unemployment, which is 5% in this case. In 2008, the unemployment rate is 5%, indicating full employment. In 2012, both real GDP and potential GDP are the same, indicating no output gap and full employment. Therefore, the correct answer is D, 2008 and 2012.

Question 15

The table below shows real GDP,potential GDP and the unemployment rate for a hypothetical economy.  TABLE 30-3
-Refer to Table 30-3.What is the NAIRU in this economy?

Accepted Answer

NAIRU (Non-Accelerating Inflation Rate of Unemployment) refers to the unemployment rate at which inflation is stable or constant. In this table, the inflation rate is stable at the potential GDP level when the unemployment rate is 6.1%. Therefore, the NAIRU in this economy is 6.1%.

Question 16

Other things being equal,many economists believe that more generous employment-insurance benefits would

Accepted Answer

More generous employment-insurance benefits would increase the incentive for unemployed individuals to search for better job opportunities and delay accepting the first available job. This increases the time it takes for frictional unemployment to decline, which would raise frictional unemployment.

Question 17

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.

Accepted Answer

Less unionization typically leads to increased wage flexibility, as unions often negotiate for higher wages and more rigid employment terms. An increase in the share of the labor force that is unionized would therefore lead to less wage flexibility, which could increase the Non-Accelerating Inflation Rate of Unemployment (NAIRU) because it would be harder to adjust wages downward in response to economic downturns, potentially leading to higher unemployment.

Question 18

As Canada continues to become more integrated with the global economy,and our labour market is increasingly affected by demand and supply conditions elsewhere in the world,we can expect that

Accepted Answer

EAs Canada integrates more with the global economy, the Non-Accelerating Inflation Rate of Unemployment (NAIRU) may increase due to structural changes in the economy affecting the labor market. This can lead to higher unemployment rates in industries that are more exposed to global competition, hence affecting the overall NAIRU and specifically the NAIRU in those affected industries.

Question 19

The table below shows real GDP,potential GDP and the unemployment rate for a hypothetical economy.  TABLE 30-3
-Refer to Table 30-3.The variations in the unemployment rate between 2007 and 2015 are likely due to variations in

Accepted Answer

The variations in the unemployment rate between 2007 and 2015 are likely due to variations in the output gap, which reflects the difference between the economy's actual output and its potential output. Changes in the output gap can lead to fluctuations in the unemployment rate as the economy expands or contracts.

Question 20

The table below shows the percentage of the labour force accounted for by males and females over a two-decade period.Assume that real GDP is equal to potential in each of the given years.  TABLE 30-4
-Refer to Table 30-4.Suppose that for each year listed the unemployment rate among males is 5% while it is 7% among females.Which of the following statements correctly describes the change in the NAIRU in this economy between 1960 and 1980?

Accepted Answer

The NAIRU (Non-Accelerating Inflation Rate of Unemployment) would increase over time if the share of females in the labor force increases, given that females have a higher unemployment rate than males. This is because the overall unemployment rate affecting inflation would rise as the proportion of the labor force with a higher unemployment rate increases.

Quiz 30: Unemployment Fluctuations and the Nairu

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.

Unemployment rates in Canada and the United States have been lower than those in Europe for many years.A generally accepted explanation for this trend is that

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.

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

Which of the following statements best explains why unemployment rates in European countries have tended to be higher than unemployment rates in Canada or the United States? (Note: this statement refers not to the current recession in Europe but to a longer-term average.)

The table below shows real GDP,potential GDP and the unemployment rate for a hypothetical economy. TABLE 30-3 -Refer to Table 30-3.In which year is the cyclical unemployment equal to 0.3%?

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

In some European countries,labour-market policies make it very costly for firms to lay off or fire workers.Theory and evidence tells us that

A decrease in the share of the labour force that is unionized may the degree of wage flexibility, which would put pressure on NAIRU.

Many economists believe that long-run economic growth is best promoted by structural change,such as with a policy of .

The table below shows real GDP,potential GDP and the unemployment rate for a hypothetical economy. TABLE 30-3 -Refer to Table 30-3.In which years is this economy operating at full employment?

The table below shows real GDP,potential GDP and the unemployment rate for a hypothetical economy. TABLE 30-3 -Refer to Table 30-3.What is the NAIRU in this economy?

Other things being equal,many economists believe that more generous employment-insurance benefits would

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.

As Canada continues to become more integrated with the global economy,and our labour market is increasingly affected by demand and supply conditions elsewhere in the world,we can expect that

The table below shows real GDP,potential GDP and the unemployment rate for a hypothetical economy. TABLE 30-3 -Refer to Table 30-3.The variations in the unemployment rate between 2007 and 2015 are likely due to variations in