Question 1

The macroeconomic problem that affects individuals most directly and severely is:

Accepted Answer

Unemployment is the macroeconomic problem that affects individuals most directly and severely as it leads to a loss of income, financial insecurity, and negative social and psychological effects. Inflation, low savings, and low investment also have negative consequences, but they do not impact individuals as immediately and significantly as unemployment.

Question 2

When there is structural unemployment, the real wage is:

Accepted Answer

Structural unemployment occurs when there is a mismatch between the skills that workers in the economy can offer and the skills demanded by employers. This often leads to real wages being rigid at a level above the market-clearing level, as wages do not adjust downward due to various factors such as minimum wage laws, labor unions, or long-term contracts, leading to a surplus of labor (unemployment).

Question 3

The natural rate of unemployment is:

Accepted Answer

The natural rate of unemployment is the average rate of unemployment around which the economy fluctuates. It is also known as the equilibrium rate of unemployment and represents a level of unemployment where there is neither an upward nor a downward pressure on wages.

Question 4

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

Accepted Answer

Sectoral shifts refer to changes in the composition of demand among industries and regions. This term is used by economists to describe the fact that demand in individual sectors of the economy changes over time, leading to changes in the distribution of employment and income across different industries and regions. Insider-outsider conflicts, moral hazard, and adverse selection are all different economic concepts unrelated to changes in demand composition.

Question 5

Government policies directed at reducing frictional unemployment include:

Accepted Answer

Making unemployment insurance 100 percent experience rated would encourage workers to search for and accept jobs more quickly, reducing the time spent in frictional unemployment. This policy would also reduce the incentives for workers to abuse the unemployment insurance system by staying unemployed for longer periods of time. The other choices are not effective policies for reducing frictional unemployment. Abolishing minimum-wage laws could actually create more unemployment by discouraging employers from hiring low-skilled workers and making it harder for those workers to gain valuable work experience. Increasing the earned income credit primarily targets reducing poverty and may not have a significant impact on frictional unemployment. Making government part of the union-firm wage bargaining process could lead to higher wages for workers and possibly reduce the incentive to search for jobs, increasing frictional unemployment.

Question 6

All of the following are reasons for frictional unemployment except:

Accepted Answer

Frictional unemployment occurs when workers are between jobs and are actively searching for new employment opportunities. It arises due to natural and unavoidable factors such as differences in worker preferences and abilities, imperfect information flows, and geographic mobility. Option B is incorrect because frictional unemployment is not caused by unemployed workers accepting the first job offer they receive; rather, it is a result of a time lag between when a worker loses a job and when they secure a new one.

Question 7

Frictional unemployment is unemployment caused by:

Accepted Answer

Frictional unemployment occurs due to the time it takes workers to search and match with suitable jobs. This could be due to various reasons such as lack of information, mismatch in skills, or personal preferences.

Question 8

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

Accepted Answer

When the real wage is above the level that equilibrates supply and demand, it means that the wage rate is too high and there are more workers willing to work than there are jobs available. This results in a surplus of labor, which is another way of saying that the quantity of labor supplied exceeds the quantity of labor demanded. This leads to unemployment as not all workers who want a job can find one. Therefore, option A is the correct choice.

Question 9

Sectoral shifts:

Accepted Answer

Sectoral shifts involve changes in the demand for labor across sectors or industries. As a result, workers may need to transition from one industry to another, which can lead to frictional unemployment. Therefore, D is the correct option. Wage rigidity, the payment of efficiency wages, and the minimum wage level are not directly related to sectoral shifts.

Question 10

Wage rigidity:

Accepted Answer

Wage rigidity prevents labor demand and labor supply from reaching the equilibrium level, causing a surplus or shortage of labor. This can lead to unemployment or labor shortages in certain industries.

Question 11

Which of the following is an example of frictional unemployment?

Accepted Answer

Frictional unemployment occurs when individuals are temporarily unemployed while transitioning from one job to another or entering the workforce. Dave's situation, where he is searching for a new job after moving, is a classic example of frictional unemployment.

Question 12

In a steady state:

Accepted Answer

In a steady state, the economy is neither expanding nor contracting, and therefore the number of people finding jobs is equal to the number of people losing jobs. In other words, there is no net change in employment levels, and the economy is in a state of equilibrium.

Question 13

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

Accepted Answer

Unemployment insurance can actually increase the natural rate of unemployment by reducing the urgency for unemployed individuals to find new work, as it provides financial support during periods of unemployment.

Question 14

The natural rate of unemployment in the United States since 1950 has averaged between and percent.

Accepted Answer

The Bureau of Labor Statistics (BLS) defines the natural rate of unemployment as the rate of unemployment that exists when the labor market is in equilibrium and the economy is producing at its potential. According to the BLS, the natural rate of unemployment in the U.S. since 1950 has averaged between 5 and 6 percent. Therefore, the best choice is C.

Question 15

If the number of employed workers equals 200 million and the number of unemployed workers equals 20 million, the unemployment rate equals percent (rounded to the nearest percent).

Accepted Answer

The unemployment rate is calculated as the number of unemployed workers divided by the total labor force (employed + unemployed) times 100. Here, it's (20 million / (200 million + 20 million)) * 100 = 9.09%, which rounds to 9%.

Question 16

One reason for unemployment is that:

Accepted Answer

It often takes time for employers to find the right candidate for a job, and for job seekers to find a job that matches their skills and preferences. This mismatch in the job market can lead to unemployment. Therefore, option A is the correct choice. The other options are not correct because all jobs are not identical, the labor market is not always in equilibrium, and it is not always easy for a laid-off worker to find a new job immediately at the market wage.

Question 17

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

Accepted Answer

The answer of Which of the following is the best...

Question 18

Workers unemployed as a result of wage rigidity are:

Accepted Answer

Workers unemployed as a result of wage rigidity are waiting for a job to become available. Wage rigidity refers to a situation where wages are set above the market-clearing level, leading to a surplus of labor and unemployment. In such a situation, workers may be reluctant to accept lower wages, which results in them waiting for a job to become available rather than actively searching for a job to match their skills. Unemployment insurance benefits are typically available to workers who have lost their job through no fault of their own, including those who are unemployed due to wage rigidity. Relocating to another part of the country may be a result of sectoral shifts, but it is not necessarily related to wage rigidity.

Question 19

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

Accepted Answer

Studies have shown that unemployed workers are more likely to find a job within a few weeks of their unemployment insurance running out, as the urgency to secure employment increases when benefits are about to end.

Question 20

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:

Accepted Answer

The unemployment rate is the ratio of people who are unemployed to the total labor force. In this case, the rate of job separation (s) represents the number of people becoming unemployed, and the rate of job finding (f) represents the number of people finding employed. Therefore, the ratio of people who are unemployed to the total labor force is s/(s+f), making choice C the correct answer.

Quiz 7: Economic Growth I: Capital Accumulation and Population Growth