Question 1

A person who leaves the labor force because they could not find a job is called:

Accepted Answer

A discouraged worker is someone who has given up on finding a job and has left the labor force as a result. A dissatisfied or disgruntled worker may still be actively seeking employment, while a disbarred worker refers specifically to someone who has been legally barred from practicing a certain profession.

Question 2

The largest cost associated with unanticipated inflation is:

Accepted Answer

Unanticipated inflation causes an arbitrary redistribution of income and wealth, as it benefits debtors by reducing the real burden of their debts, while causing harm to savers and fixed-income earners by reducing the purchasing power of their savings and income. This redistribution is arbitrary as it is unrelated to any productive activity or initiative, and it creates a sense of unfairness and uncertainty that undermines social trust and economic stability.

Question 3

Carla lost her job and immediately started looking for another job. As a result the:

Accepted Answer

When Carla lost her job and started looking for another job, she becomes unemployed and adds to the number of people who are seeking employment but are unable to find it. This increases the number of unemployed in the labor force, hence increasing the unemployment rate.

Question 4

-Refer to Table 6.13. If 1999 is the base year, the inflation rate between 1999 and 2001 is:

Accepted Answer

The inflation rate is calculated as the percentage change in the price index from the base year (1999) to 2001. If the price index in 1999 is 100 (as it is the base year), and in 2001 it is 114, the inflation rate is ((114-100)/100)*100% = 14%.

Question 5

A person who is currently actively looking for a job, but has not found a job is classified by the BLS as:

Accepted Answer

The BLS (Bureau of Labor Statistics) classifies a person as unemployed if they do not have a job, have actively looked for work in the past four weeks, and are currently available for work. Therefore, a person who is actively looking for a job but has not found one is considered unemployed.

Question 6

-Refer to Table 6.13. If 2000 is the base year, the inflation rate between 1999 and 2001 is:

Accepted Answer

The inflation rate is calculated by finding the percentage change in the price index from 1999 to 2001. If 2000 is the base year, the price index for 2000 is 100. Assuming the price index for 1999 is lower and for 2001 is higher, the percentage change from 1999 to 2001 is 14%.

Question 7

The labor force participation rate is the ratio of the:

Accepted Answer

The labor force participation rate is calculated by dividing the labor force (which includes both the employed and unemployed actively seeking work) by the total population aged 16 years or older, and then multiplying by 100 to get a percentage.

Question 8

If you expect that the inflation rate is 5 percent and the inflation actual inflation rate turned out to be exactly 5 percent, then:

Accepted Answer

If the expected inflation rate matches the actual inflation rate, this means that all inflation was anticipated and there is no unanticipated inflation. Therefore, choice A is the correct answer.

Question 9

If the number of unemployed increases by the same number as the number of people in the labor force, then:

Accepted Answer

If the number of unemployed increases by the same number as the number of people in the labor force, then the unemployment rate will increase. This is because the formula for calculating the unemployment rate is the number of unemployed individuals divided by the labor force, so if both numbers increase by the same amount, the ratio remains the same but the overall number of unemployed individuals has increased. Population growth rate and labor force participation rate are not affected by this scenario.

Question 10

The economy attains full employment when the unemployment rate

Accepted Answer

Full employment is achieved when the unemployment rate equals the natural rate of unemployment, which is the rate of unemployment when there is no cyclical unemployment, but only structural and frictional unemployment. It is generally considered to be between 4-5% in the US.

Question 11

Recall Application 3, "Social Norms, Unemployment ,and Perceived Happiness," to answer the following questions:
-According to the application, Andrew Clark found that the more an individual was, the aggressive he or she was in looking for a job.

Accepted Answer

Andrew Clark found that individuals who were unhappy were more aggressive in looking for a job, as they were motivated to change their situation and improve their perceived happiness.

Question 12

An individual who cannot find a job because his or her job skills have become obsolete is an example of:

Accepted Answer

Structural unemployment occurs when an individual's job skills are no longer in demand or relevant in the job market. This can happen due to technological advances or shifts in the economy. Unlike frictional unemployment (temporary unemployment due to job searching) and seasonal unemployment (unemployment due to seasonal variations in demand for labor), structural unemployment is more long-term and may require re-training or acquiring new skills to secure employment. Cyclical unemployment occurs due to fluctuations in the business cycle and is characterized by a general downturn in economic activity.

Question 13

The natural rate of unemployment is generally thought of as the:

Accepted Answer

The natural rate of unemployment includes both frictional and structural unemployment, as these are considered "normal" levels of unemployment that exist even when the economy is functioning at full capacity. Cyclical unemployment, on the other hand, is caused by fluctuations in the business cycle and is not part of the natural rate. Therefore, the natural rate of unemployment is best represented by the sum of frictional and structural unemployment rates.

Question 14

Suppose that 1999 is the base year and the price index for 2008 is 130. A basket of goods that is valued $450 in 2008 would cost _______ in 1999.

Accepted Answer

The answer of Suppose that 1999 is the base year...

Question 15

Discouraged workers are workers who leave the labor force because of:

Accepted Answer

Discouraged workers leave the labor force due to their inability to find jobs, rather than difficulties in transportation or childcare.

Question 16

During the early 1990s, companies started downsizing. One of the results of this downsizing was the permanent reduction in the number of middle management positions. This change in the way businesses operate would have:

Accepted Answer

Downsizing and reducing middle management positions could increase the natural rate of unemployment as it leads to more displaced workers and a smaller job pool for those seeking employment.

Question 17

The economy is in a recession and the housing market is in a slump. As a result of this, a real estate firm lays off half of its real estate agents. This is an example of:

Accepted Answer

Cyclical unemployment occurs due to downturns in the business cycle, such as a recession, leading to reduced demand for goods and services, including housing, resulting in layoffs.

Question 18

The unemployment rate is defined as the ratio of the:

Accepted Answer

The unemployment rate is defined as the ratio of the number of people unemployed to the labor force, not to the total population or any other group.

Question 19

-Refer to Table 6.1. The labor force equals:

Accepted Answer

The answer of 
-Refer to Table 6.1. The labor force...

Question 20

While one benefit of unemployment insurance is that it can temporarily offset some of the financial costs of losing a job, its downside is that it:

Accepted Answer

Unemployment insurance provides a safety net for workers who lose their jobs, but it also may lead to an increase in the length of time a worker remains unemployed. This is because unemployment benefits can create a disincentive to look for work or accept a job that pays less than the benefits received. Additionally, some workers may delay their job search until their benefits are close to expiring, leading to longer periods of unemployment.

Quiz 6: Unemployment and Inflation