Question 1

Refer to the figure. Given this view of the real business cycle for the United States over the time period 1970 to 2008, when would you expect cyclical unemployment to have been the highest?

Accepted Answer

The peak of the real business cycle in 1982 corresponds with the highest level of cyclical unemployment, as unemployment tends to be highest during the trough of a recession.

Question 2

What does the World Bank's "rigidity of employment index" provide for us?

Accepted Answer

The rigidity of employment index provided by the World Bank measures the costs for firms to hire, fire, and adjust employment hours, giving insight into the level of flexibility in a country's labor market. It does not provide information on the length of unemployment or government assistance available for workers.

Question 3

The Keynesian explanation for cyclical unemployment is

Accepted Answer

The Keynesian explanation for cyclical unemployment is that wage demands are too high relative to falling prices, resulting in a decrease in demand for labor and an increase in unemployment during economic downturns.

Question 4

Which of the following statements about the employment-at- will doctrine is TRUE?

Accepted Answer

The employment-at-will doctrine allows employers to hire or fire employees for any reason (with some exceptions), which generally lowers the costs associated with hiring and firing. This can lead to lower unemployment rates as employers may be more willing to hire if they know they can easily adjust their workforce as needed.

Question 5

Unemployment correlated with the business cycle is called

Accepted Answer

Cyclical unemployment is directly related to the fluctuations in the business cycle. It occurs when businesses lay off workers in response to a decrease in demand for goods and services. This type of unemployment is not related to individual skills or qualifications and is considered a macroeconomic issue.

Question 6

Comparing current real GDP growth to _______ will give a good indication of the change in the unemployment rate.

Accepted Answer

Comparing current real GDP growth to average real GDP growth will give a good indication of the change in the unemployment rate because real GDP growth is closely related to job growth. If the economy is growing at a faster rate than the average, this could indicate that more jobs are being created, leading to a decrease in the unemployment rate. On the other hand, if the economy is growing at a slower rate than the average, this could indicate that fewer jobs are being created, which could lead to an increase in the unemployment rate. Nominal GDP growth and real growth rates for the past two years may be useful in other contexts but will not provide as direct an indication of unemployment rate changes as comparing to average real GDP growth.

Question 7

Examples of active labor market policies include I. job-retraining programs. II. job-search assistance. III. early re-employment bonuses.

Accepted Answer

Active labor market policies are designed to increase the efficiency and effectiveness of labor markets by helping workers to find suitable jobs and employers to find suitable workers. Job-retraining programs (I) provide workers with skills training and education to enhance their employability in changing labor markets. Job-search assistance (II) helps workers to find new jobs by connecting them with job openings, providing job search guidance, and offering other support services. Early re-employment bonuses (III) provide financial incentives to unemployed workers who find new jobs quickly, encouraging them to return to work and reducing the duration of unemployment. All three policies can be effective in reducing unemployment and increasing labor market efficiency.

Question 8

Employment protection laws tend to I. increase the duration of unemployment. II. increase labor market flexibility. III. increase the job security of workers.

Accepted Answer

Employment protection laws increase job security of workers but also tend to increase the duration of unemployment. It is not likely to increase labor market flexibility as it can make it difficult for employers to lay off employees or negotiate wages.

Question 9

During recessions the unemployment rate

Accepted Answer

During recessions, there is a decrease in economic activity which leads to a decrease in demand for goods and services. This results in companies laying off workers and a decrease in job opportunities, ultimately leading to an increase in the unemployment rate.

Question 10

What allows an employee to quit at any time and an employer to fire at any time for any reason?

Accepted Answer

Employment-at-will is a legal doctrine that allows both employers and employees to terminate an employment relationship at any time and for any reason (with some exceptions such as discrimination based on protected characteristics). It is the most common form of employment relationship in the United States. Contractual autonomy and termination sovereignty are not recognized legal doctrines, and the right-to-hire is not relevant to this question.

Question 11

Job search programs and work tests for unemployed workers are likely to be sponsored by

Accepted Answer

Programs and work tests for unemployed workers are typically sponsored by governments as part of their efforts to address unemployment and support the workforce. While some firms or unions may offer their own job search programs, they are not typically as widespread or comprehensive as those provided by governments. Additionally, workers themselves would not typically have the resources or structure to sponsor such programs.

Question 12

In 2005, immigrant youth rioted in Paris and throughout France giving high unemployment as one of their main reasons. Who were their most vocal opponents?

Accepted Answer

University students were the most vocal opponents because they were concerned about job competition and the potential impact on their own employment prospects.

Question 13

Long-term unemployment tends to be higher when the government I. raises job security. II. raises hiring and firing costs. III. lowers restrictions for firms to adjust work hours.

Accepted Answer

Raising job security and hiring and firing costs can make firms more hesitant to hire, leading to higher long-term unemployment. Lowering restrictions for firms to adjust work hours can increase flexibility and potentially reduce unemployment.

Question 14

Which of the following best describes the effects of a major labor union that maintains a union wage above the market equilibrium wage?

Accepted Answer

When a union wage is set above the market equilibrium, it results in a surplus of labor, meaning more workers are willing to work at the higher wage than there are jobs available, leading to increased unemployment.

Question 15

Why does unemployment rise during recessions? I. because of labor reallocation among affected industries in response to real economic shocks II. because wages do not fall as fast as prices, and firms cannot afford to employ as many workers III. because of increases in aggregate demand

Accepted Answer

Unemployment rises during recessions primarily due to labor reallocation and wage rigidity. Labor reallocation occurs as industries adjust to economic shocks, and wage rigidity happens because wages do not fall as quickly as prices, leading firms to reduce their workforce. Increases in aggregate demand typically reduce unemployment, not increase it.

Question 16

Higher GDP growth

Accepted Answer

Higher GDP growth generally leads to higher job creation, which decreases the unemployment rate.

Question 17

What type of laws affects young, minority, and unemployed workers most negatively?

Accepted Answer

Employment protection laws can make it more difficult for young, minority, and unemployed workers to enter the job market, as employers may be hesitant to hire due to the costs and risks associated with firing.

Question 18

Which one of the following reasons explains why the French at- will employment proposal for the younger population failed?

Accepted Answer

The French youth, including students and workers, viewed the at-will employment proposal as a threat to job security and an infringement on their rights, leading to widespread protests and its eventual withdrawal.

Question 19

What problem do employment protection laws create?

Accepted Answer

Employment protection laws make it difficult for employers to fire workers, leading to reluctance to hire new workers. This can ultimately result in higher unemployment rates.

Question 20

Which one of the following statements regarding the rigidity of employment index discussed in the text is NOT correct?

Accepted Answer

The statement that the U.S. labor market experiences more rigidity and ranks higher on the index than most European countries is incorrect. In fact, the U.S. ranks lower on the rigidity of employment index than many European countries.

Quiz 28: Growth, Capital Accumulation, and the Economics of Ideas: Catching up Vs the Cutting Edge