Question 1

Structural unemployment results when the number of jobs is insufficient for the number of workers.

Accepted Answer

Structural unemployment is a type of unemployment caused by a mismatch between the skills or location of workers and demand for labor in certain industries, resulting in a surplus of labor and a shortage of job openings.

Question 2

A typical American worker covered by unemployment insurance receives 50 percent of his former wages for 52 weeks.

Accepted Answer

A typical American worker covered by unemployment insurance usually receives benefits for a maximum of 26 weeks, not 52 weeks, and the replacement rate is often less than 50% of their former wages, varying by state.

Question 3

The unemployed who quit their jobs, were fired for cause, or just entered the labor force are not eligible for unemployment insurance.

Accepted Answer

This is true. To be eligible for unemployment insurance, an individual must have lost their job through no fault of their own, such as through layoffs or business closures.

Question 4

When a minimum-wage law forces the wage to remain above the level that balances supply and demand, the result is a surplus of labor.

Accepted Answer

This is because employers are unwilling or unable to hire all of the workers who are willing to work at the higher wage rate. This creates a surplus of labor, which is also known as unemployment.

Question 5

When a minimum-wage law forces the wage to remain above the level that balances supply and demand, the result is a shortage of labor.

Accepted Answer

When a minimum-wage law forces the wage to remain above the level that balances supply and demand, the result is a surplus of labor, meaning unemployment, not a shortage.

Question 6

Unemployment insurance reduces the incentive for the unemployed to find and take new jobs.

Accepted Answer

Unemployment insurance can reduce the urgency for unemployed individuals to find and accept new jobs quickly because it provides them with a temporary source of income, potentially making them less motivated to seek employment immediately.

Question 7

The unemployed who quit their jobs, were fired for cause, or just entered the labor force are eligible for unemployment insurance.

Accepted Answer

Unemployment insurance typically requires that individuals are unemployed through no fault of their own (e.g., layoffs) rather than quitting voluntarily, being fired for cause, or just entering the labor force.

Question 8

When a minimum-wage law forces the wage to remain above the level that balances supply and demand, there are more workers willing to work than there are jobs, so some workers are unemployed.

Accepted Answer

This is the basic concept of how minimum wage laws can lead to unemployment. When the minimum wage is set above the equilibrium wage (the wage that balances supply and demand), it creates a surplus of labor, meaning there are more workers willing to work than there are jobs available. This can lead to unemployment, as some workers will be unable to find jobs at the higher minimum wage.

Question 9

Studies have shown that the design of the unemployment insurance system reduces the job search effort of the unemployed.

Accepted Answer

Research has found that certain design features, such as longer benefit durations or higher replacement rates, can reduce the job search intensity of the unemployed. This is because individuals may feel less pressure to find work quickly and may not be as motivated to search for jobs that match their skills and preferences. However, other design features, such as job search requirements or reemployment services, can increase job search effort and improve labor market outcomes.

Question 10

Other things the same, countries that offer more generous and longer-lasting unemployment insurance benefits are likely to have higher unemployment rates.

Accepted Answer

When people are given more generous and longer-lasting unemployment insurance benefits, they may be less motivated to find a job quickly. This can lead to higher unemployment rates.

Question 11

A minimum wage that is below the equilibrium wage rate does not raise unemployment.

Accepted Answer

A minimum wage set below the equilibrium wage rate does not raise unemployment because it is already lower than what employers are willing to pay and what workers are willing to accept, thus it does not interfere with the labor market equilibrium.

Question 12

Minimum-wage laws are one reason there is always some unemployment in the U.S. economy.

Accepted Answer

Minimum-wage laws make it more expensive for employers to hire workers, which can lead to them hiring fewer workers or increasing automation. This can contribute to unemployment.

Question 13

Minimum wage laws help explain the natural rate of unemployment if they create a surplus in any labor market.

Accepted Answer

Minimum wage laws can create a surplus of labor if they set the wage above the market-clearing level. This surplus of labor leads to an increase in the natural rate of unemployment. Therefore, minimum wage laws do help explain the natural rate of unemployment in this way.

Question 14

When a minimum-wage law forces the wage to remain above the level that balances supply and demand, the quantity of labor supplied is lower and the quantity of labor demand is higher than at the equilibrium wage.

Accepted Answer

When a minimum-wage law forces the wage to remain above the equilibrium level, the quantity of labor supplied becomes higher than the quantity demanded, leading to a surplus of labor or unemployment, not the other way around.

Question 15

Some economists have argued that unemployment insurance improves the ability of the economy to match each worker with the most appropriate job.

Accepted Answer

Unemployment insurance provides a safety net for workers who lose their jobs, giving them time and resources to search for the best job match rather than accepting a job out of desperation. This can lead to a better allocation of labor resources in the economy.

Question 16

Most economists agree that eliminating unemployment insurance would increase the amount of unemployment in the economy.

Accepted Answer

Most economists believe that unemployment insurance provides a safety net for individuals who lose their jobs, allowing them to spend money on goods and services, which helps to stabilize the economy. Eliminating it could reduce consumer spending, potentially leading to higher unemployment, but the statement as phrased suggests the opposite effect, which is not the consensus view.

Question 17

Most economists agree that eliminating unemployment insurance would increase the nation's overall level of well-being.

Accepted Answer

This statement is false. Most economists actually believe that unemployment insurance provides a necessary safety net for individuals who lose their jobs and can help stabilize the overall economy during times of recession.

Question 18

Unemployment insurance causes workers to be less likely to seek guarantees of job security when they negotiate with employers over the terms of employment.

Accepted Answer

This is because unemployment insurance provides a safety net for workers in case they lose their job, reducing the need for them to seek guarantees of job security when negotiating with employers.

Question 19

Minimum wages are the predominant reason for unemployment in the U.S. economy.

Accepted Answer

The relationship between minimum wages and unemployment is a highly debated topic. Some argue that increasing minimum wages can lead to job losses as employers may find it more expensive to hire workers, while others argue that it can boost consumer spending and reduce turnover, ultimately leading to job creation. However, there is no consensus that minimum wages are the predominant reason for unemployment in the U.S. economy.

Question 20

When a minimum-wage law forces the wage to remain above the level that balances supply and demand, the quantity of labor supplied is higher and the quantity demanded of labor is lower than at the equilibrium wage.

Accepted Answer

This is the basic economic principle of a price floor, which is what a minimum wage law creates in the labor market. When the price (wage) is artificially raised above the equilibrium level, it creates a surplus of supply (workers willing to work at the higher wage) and a shortage of demand (employers willing to hire at the higher wage).

Quiz 28: Unemployment and Its Natural Rate