Question 1

The lower the amount of unemployment benefits citizens receive, the

Accepted Answer

Lower unemployment benefits increase the opportunity cost of job search because individuals have less financial support while unemployed, incentivizing them to accept job offers more quickly.

Question 2

The length of time people spend in search of a job increases if

Accepted Answer

If unemployment benefits increase, people may be less motivated to find a job quickly as they have a source of income during the search. Hence, they will spend more time looking for a job.

Question 3

Which of the following increases frictional and/or structural unemployment?
i. more young workers entering the labor force
ii. more generous unemployment benefits
iii. a structural slump with some industries dying

Accepted Answer

More young workers entering the labor force can increase frictional unemployment as they search for jobs. More generous unemployment benefits can increase frictional unemployment by reducing the urgency to find a new job. A structural slump with dying industries increases structural unemployment as workers need to retrain for new industries.

Question 4

The length of time an unemployed person searches for a job is likely to increase as

Accepted Answer

Unemployment benefits provide financial support to individuals who have lost their jobs. Therefore, if unemployment benefits become more generous, unemployed individuals may be less motivated to search for a job actively. This can lead to an increase in the duration of unemployment spells.

Question 5

More generous unemployment benefits ________ the opportunity cost of looking for a new job and therefore ________ the job search process

Accepted Answer

More generous unemployment benefits lower the opportunity cost of looking for a new job because individuals can afford to spend more time searching without immediate financial pressure, which can extend the job search process.

Question 6

Job rationing occurs when the real wage is ________ the equilibrium level and there is a ________ of labor.

Accepted Answer

Job rationing occurs when the real wage is above the equilibrium level, leading to a surplus of labor because employers demand less labor at higher wages, while more workers are willing to work at these higher wages.

Question 7

Efficiency wages, above equilibrium minimum wage rates, and higher union wages are likely to

Accepted Answer

Efficiency wages, above equilibrium minimum wage rates, and higher union wages can lead to higher unemployment because they set wages above the market-clearing level, causing a surplus of labor, which increases the natural rate of unemployment.

Question 8

The increase in the average unemployment rate in the 1970s was the result of

Accepted Answer

The increase in the average unemployment rate in the 1970s was largely attributed to the increase in the birth rate in the late 1940s and early 1950s. This led to a larger labor force, which made it more difficult for individuals to find jobs and thus resulted in a higher overall unemployment rate.

Question 9

Structural change influences the unemployment rate and such structural change is created by changes in

Accepted Answer

Structural change refers to the long-term changes in the economy's structure, including changes in technology, production methods, and the composition of the workforce. These changes can impact the demand and supply for certain types of labor, leading to changes in the unemployment rate. Real GDP, seasons, population, and minimum wage can affect the overall level of economic activity or the distribution of income, but they are not direct drivers of structural change.

Question 10

France is considering implementing policies that will reduce the duration of job search.A possible option is for France to

Accepted Answer

Reducing unemployment benefits could incentivize job seekers to find work faster, as they would have less financial support to rely on during their search. This would ultimately reduce the duration of job search. Increasing the minimum wage would not necessarily address the issue of job search duration, and helping negotiate higher union benefits for employed workers would not directly affect job seekers who are currently unemployed. Requiring all residents between the ages of 19 and 26 to obtain a job could also help address unemployment, but may not be feasible or effective for all individuals in that age range. Therefore, reducing unemployment benefits is the most logical option for addressing the duration of job search in France.

Question 11

Job rationing occurs when the real wage rate is

Accepted Answer

Job rationing occurs when the real wage rate is above the equilibrium wage rate, leading to an excess supply of labor, as employers are unwilling to hire more workers at the higher wage.

Question 12

France offers its citizens generous unemployment benefits for up to 24 months.The United States offers its citizens less generous unemployment benefits for up to 6 months.From this information, it is likely that the natural unemployment rate is

Accepted Answer

Generous unemployment benefits can lead to a higher natural unemployment rate as they may reduce the incentive for individuals to find new employment quickly.

Question 13

Which of the following creates job rationing?

Accepted Answer

Job rationing occurs when the real wage rate is above the equilibrium level. This means that there are more workers willing to work at that wage rate than there are job openings available. Therefore, employers must ration out the jobs to only a select number of workers, creating job rationing.

Question 14

Data indicate that the natural unemployment rate in Canada is typically 3 percentage points higher than the U.S.natural unemployment rate.This difference is most likely the result of differences in

Accepted Answer

The natural unemployment rate is the rate of unemployment that exists when the economy is at full employment, meaning there is no cyclical unemployment. This rate is largely influenced by institutional and structural factors, including labor market policies and the generosity of unemployment benefits. Since Canada and the United States have different unemployment benefit systems, it is likely that the difference in their natural unemployment rates can be attributed to this factor. Therefore, option D, "unemployment benefits," is the best choice.

Question 15

A newspaper headline reads "A New Wave of Workers Enters the Job Market!" This wave of young, new entrants to the labor market is likely to lead to

Accepted Answer

A new wave of workers entering the job market will increase the labor supply, leading to an increase in the natural unemployment rate.

Question 16

Which of the following can result in job rationing?
i. minimum wage
ii. union wage
iii. diminishing returns

Accepted Answer

Minimum wage and union wage can increase labor costs, leading to a decrease in demand for labor and potentially resulting in job rationing. Diminishing returns, on the other hand, refers to a situation where the marginal output of additional units of labor decreases, but it is not necessarily related to job rationing.

Question 17

The natural unemployment rate is higher if

Accepted Answer

Generous unemployment benefits can increase the natural unemployment rate by reducing the incentive for unemployed individuals to seek new employment quickly.

Question 18

If we compare the Canadian natural unemployment rate to the U.S.natural unemployment rate, we find that for most years since 1980

Accepted Answer

The Canadian natural unemployment rate has often been higher than the U.S. rate, possibly due to more generous unemployment benefits in Canada, which can reduce the incentive to quickly find new employment.

Question 19

Suppose the full-employment equilibrium wage rate is $11 per hour while the real wage rate is $12 per hour.As a result,

Accepted Answer

Since the real wage rate is higher than the equilibrium wage rate, employers will not be able to hire as many workers as are willing to work at that wage. As a result, job rationing will occur and some workers will remain unemployed.

Question 20

If the amount paid as unemployment benefits decreases, the opportunity cost of job search

Accepted Answer

The answer of If the amount paid as unemployment benefits...

Quiz 8: Potential Gdp and the Natural Unemployment Rate