Question 1

Costco is an example of a company that tries to improve productivity by:

Accepted Answer

Costco is known for paying an efficiency wage, which means they pay higher wages than the industry average to increase productivity and reduce employee turnover.

Question 2

Which of the following does NOT contribute to structural unemployment?

Accepted Answer

Structural unemployment is caused by a mismatch between the skills that workers in the economy can offer and the skills demanded by employers. This can be due to factors such as efficiency wages, minimum wage laws, and changing technology, which alter the structure of labor demand or the skill set required. Prolonged job searches, however, are more related to frictional unemployment, which occurs when workers are between jobs or are searching for their first jobs.

Question 3

Unemployment insurance:

Accepted Answer

Unemployment insurance provides financial assistance to unemployed workers, which can afford them the ability to wait for a job that better matches their skills or preferences, rather than accepting the first available job. This means they can be pickier about job offers, but it does not directly raise the marginal benefit of getting a job, raise wages, or reduce frictional unemployment.

Question 4

How does the expansion of international trade relate to structural unemployment in a country?

Accepted Answer

The expansion of international trade often leads to countries specializing in the production of goods and services for which they have a comparative advantage. This specialization can change the types of jobs available in the economy, leading to structural unemployment as workers may not have the skills needed for the new jobs created by trade. This type of unemployment is often temporary as the workforce adjusts and acquires new skills.

Question 5

Markus enters the labor force after graduation from college to seek a job that will use the skills he gained earning his degree in mathematics, a field in which there are many job openings. During his search for a job, he will be considered to be _____ unemployed.

Accepted Answer

Markus is considered to be frictionally unemployed because he is in between jobs and actively looking for work that matches his skills and qualifications. Frictional unemployment occurs when individuals are temporarily unemployed while transitioning from one job to another or entering the workforce for the first time, as in Markus's case.

Question 6

Cyclical unemployment is the only type of unemployment that is related to:

Accepted Answer

Cyclical unemployment is directly related to the phases of the business cycle, such as recessions and expansions, rather than technology changes, job application processes, or seasonal variations.

Question 7

Macroland's unemployment rate is 7%. The breakdown into different types of unemployment is frictional 3%, structural 2.5%, and cyclical 1.5%. Based on this data, what is the natural rate of unemployment in Macroland?

Accepted Answer

The natural rate of unemployment is the sum of frictional and structural unemployment, which in this case is 3% + 2.5% = 5.5%.

Question 8

The optimal unemployment rate in a country is:

Accepted Answer

The optimal unemployment rate in a country is considered to be the country's natural rate of unemployment. This rate includes frictional and structural unemployment but excludes cyclical unemployment, reflecting the number of people who are unemployed due to the natural turnover in the labor market and the time it takes for people to find a job that matches their skills. A 0% unemployment rate is not considered optimal because it may indicate a labor market that is too tight, potentially leading to inflation.

Question 9

Macroland's output is at a low and stable level. Unemployment is at the highest level that Macroland has experienced in five years. Based on this description, Macroland is in what stage of the business cycle?

Accepted Answer

A trough is the stage in the business cycle where the economy is at its lowest point, characterized by low output and high unemployment, before it begins to recover.

Question 10

Macroland's output is rising. Unemployment has been falling for the past year. Based on this description, Macroland is in what stage of the business cycle?

Accepted Answer

Macroland is in the expansion phase of the business cycle, indicated by rising output and falling unemployment. This phase is characterized by economic growth and increasing employment.

Question 11

Macroland's output is falling. Unemployment has been rising for the past year. Based on this description, Macroland is in what stage of the business cycle?

Accepted Answer

Macroland is in a recession, indicated by falling output and rising unemployment, which are classic signs of an economic downturn.

Question 12

Through repeated business cycles, in most countries the average national output in the long run shows:

Accepted Answer

In the long run, most countries experience economic growth, leading to a trend of slowly rising average national output. This is due to factors like technological advancements, capital accumulation, and improvements in labor productivity.

Question 13

The length of stages in the business cycle _____ across the stages in a given cycle, and they _____ across cycles over time.

Accepted Answer

The length of stages in the business cycle varies across the stages in a given cycle, and they also vary across cycles over time due to differences in economic conditions, policy responses, and external shocks.

Question 14

Which of the following is NOT a seasonal industry?

Accepted Answer

Light bulbs are not a seasonal industry because their demand is relatively constant throughout the year, unlike retail stores, farming, and snow skiing, which experience significant fluctuations in demand based on the season.

Question 15

According to Econia's population and employment statistics, the country has a population of 100 million people. There are 70 million persons age 16 or older, 50 million employed, and 4 million unemployed. Based on this data, what are Econia's U3 unemployment and labor force participation rates (LFPRs)?

Accepted Answer

The answer of According to Econia's population and employment statistics,...

Question 16

Summarize the ways in which an individual enters and leaves the category of unemployed.

Accepted Answer

The answer of Summarize the ways in which an individual...

Question 17

Describe limitations to the U3 unemployment rate that lead it to underestimate the unfulfilled desire for work among the adults in a country.

Accepted Answer

The answer of Describe limitations to the U3 unemployment rate...

Question 18

The labor force consists of only part of a country's population. Who is and who is not included in a country's labor force?

Accepted Answer

The answer of The labor force consists of only part...

Question 19

The U6 unemployment rate was developed to address some limitations in the U3 rate. What does the U6 rate measure that is not captured in the U3 unemployment rate calculation?

Accepted Answer

The answer of The U6 unemployment rate was developed to...

Question 20

What does the labor force participation rate measure, and how is it calculated?

Accepted Answer

The answer of What does the labor force participation rate...

Quiz 21: Unemployment and the Business Cycle