Question 1

According to the neo-classical model, what would not result from the government levying a tax on firms for each worker the firm lays off?

Accepted Answer

According to the neo-classical model, levying a tax on firms for each worker laid off would increase the cost of laying off workers, making it less attractive for firms to do so. This would result in firms being less likely to lay off workers and more likely to keep them employed, leading to an increase in the long-run employment rate. Therefore, option D is the correct answer. The other options are not consistent with the assumptions of the neo-classical model.

Question 2

Centerville has 200 unemployed people. Of these 200 people, 35 are unemployed for two weeks before finding a new job, 55 are unemployed for four weeks before finding a new job, 30 are unemployed for six weeks before finding a new job, 15 are unemployed for ten weeks before finding a new job, and 65 are unemployed for fifteen weeks before finding a new job. Approximately what is the average spell of unemployment in Centerville?

Accepted Answer

To find the average spell of unemployment, we need to find the total number of weeks of unemployment and divide by the total number of unemployed people. 
Total number of weeks of unemployment = (35 x 2) + (55 x 4) + (30 x 6) + (15 x 10) + (65 x 15) = 1,435 
Total number of unemployed people = 200 
Therefore, the average spell of unemployment is 1,435/200 = 7.175 weeks, which is closest to 8 weeks (choice C).

Question 3

What is the best description of unemployment insurance benefits in the United States?

Accepted Answer

Unemployment benefits in the US are calculated as a percentage of previous earnings, so low-wage workers would receive a higher percentage of their previous earnings than high-wage workers. Family size and age are not factors in determining benefits, and benefits vary by state. Therefore, option E is the best description.

Question 4

Why is frictional unemployment considered to be productive?

Accepted Answer

Frictional unemployment is considered to be productive because the search activities between workers and firms improve the allocation of resources. This process ensures that workers are matched with jobs that best suit their skills and preferences, leading to increased productivity overall.

Question 5

Which of the following would not increase the asking wage?

Accepted Answer

An increase in the unemployment rate typically indicates a weaker job market, which may lead individuals to lower their asking wage expectations to increase their chances of finding employment.

Question 6

Which age group experiences the highest rates of unemployment in the United States?

Accepted Answer

According to the Bureau of Labor Statistics, the 16 to 24 years-old age group experiences the highest rates of unemployment in the United States, often double the national average. This is due to factors such as lack of job experience and competition with more experienced workers.

Question 7

Anna works on a farm every spring during planting season and every fall during the harvest season. The farm fails to employ Anna during the summer or the winter. What type of unemployment does Anna experience?

Accepted Answer

Anna experiences seasonal unemployment because she is employed only during certain seasons and not employed during others due to factors beyond her control, such as the seasonal nature of farming.

Question 8

How does the asking wage depend on the unemployment insurance system in the United States?

Accepted Answer

When individuals are receiving unemployment insurance benefits, they may be more willing to accept lower wages than when they are not receiving benefits because they want to avoid exhausting their benefits and facing prolonged periods of unemployment without any income. As a result, the asking wage tends to fall as the unemployed worker gets closer to exhausting his or her UI benefits.

Question 9

If the steady-state unemployment rate for an economy is 5%, and each period 2% of employed workers lose their jobs, what percent of unemployed workers find employment each period?

Accepted Answer

The answer of If the steady-state unemployment rate for an...

Question 10

In the United States, the average replacement ratio associated with unemployment insurance benefits is

Accepted Answer

The answer of In the United States, the average replacement...

Question 11

Consider an economy with a labor force of 100 million people. Each period, 60% of the unemployed population find a job while 15% of the employed population lose their job. What is the steady-state unemployment rate in the economy?

Accepted Answer

The answer of Consider an economy with a labor force...

Question 12

In the United States from 1950 to 2005, it is most likely that an unemployed person will

Accepted Answer

The correct answer is A because the question asks for the most likely outcome for an unemployed person in the United States from 1950 to 2005, and the answer choice A states that the unemployed person is most likely to be re-employed in less than 5 weeks.

Question 13

The United States funds its unemployment compensation system by

Accepted Answer

The United States funds its unemployment compensation system by taxing firms more when they have a history of causing more layoffs, up to a point. This system is called the experience rating system, which aims to encourage firms to maintain stable employment levels and avoid layoffs. Firms with a higher layoff rate will pay higher unemployment insurance taxes than firms with a lower layoff rate, incentivizing them to improve their work practices to reduce employee turnover.

Question 14

Compared to a labor market that has no unemployment benefit system, the unemployment insurance system of the United States probably

Accepted Answer

Unemployment insurance can increase the unemployment rate by providing financial support to unemployed individuals, which may reduce their urgency to find new employment quickly. This can lead to longer periods of job search and higher overall unemployment rates.

Question 15

Consider an economy with a labor force of 200 million people-180 million are employed while 20 million are unemployed. Each period, 45% of the unemployed population finds a job. If the economy is in a steady-state of unemployment, what percent of the employed population lose their job each period?

Accepted Answer

In a steady-state, the number of people finding jobs equals the number of people losing jobs. 45% of 20 million unemployed find jobs, which is 9 million. To maintain steady-state, 9 million of the 180 million employed must lose their jobs, which is 5%.

Question 16

How are unemployment rates in the United States related to education?

Accepted Answer

Studies consistently show that higher levels of education are associated with lower rates of unemployment. For example, according to the Bureau of Labor Statistics, the unemployment rate for individuals with a Bachelor's degree or higher is consistently lower than the overall unemployment rate, while the unemployment rate for individuals with less education is consistently higher. Therefore, the correct choice is C.

Question 17

James is currently unemployed. He is disappointed every Sunday when none of the job advertisements in the newspaper are for workers with his particular skill set. What type of unemployment is James experiencing?

Accepted Answer

James is experiencing structural unemployment, which occurs when a worker's skills are no longer in demand or match the available job opportunities. This is evident as the job advertisements in the newspaper do not match his particular skill set.

Question 18

What is the general relationship between race and unemployment rates in the United States?

Accepted Answer

Statistics show that historically, blacks have had the highest unemployment rates in the United States, regardless of economic conditions, while whites have had the lowest unemployment rates. Hispanics typically have unemployment rates that fall in between those of whites and blacks.

Question 19

What does it mean to conduct a sequential search?

Accepted Answer

Conducting a sequential search means determining an asking wage and then accepting the first job offer that pays a wage equal to or greater than the asking wage. This approach allows for a systematic and rational job search, leading to greater job satisfaction and potentially higher wages.

Question 20

An important development during the Great Recession of 2007-2010 was that

Accepted Answer

During the Great Recession, unemployment spells typically lasted between 13 to 26 weeks, reflecting the prolonged economic downturn and slow recovery.

Quiz 12: Unemployment