Question 1

When the baby boomers began to retire in 2008,the labor force participation rate increased.

Accepted Answer

The labor force participation rate actually decreased as baby boomers began to retire in 2008.

Question 2

What factors might increase structural unemployment and what factors might decrease structural unemployment in a given country?

Accepted Answer

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Question 3

In a recession,the actual rate of unemployment in an economy is equal to its natural rate of unemployment.

Accepted Answer

In a recession, the actual rate of unemployment is typically higher than the natural rate of unemployment due to a decrease in demand for goods and services, leading to businesses laying off workers. The natural rate of unemployment represents the level of unemployment that exists when an economy is operating at full capacity, and there is no cyclical unemployment.

Question 4

If the number of unemployed workers is 9.5 million and the number of employed workers is 146 million,what is the unemployment rate?

Accepted Answer

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Question 5

When the unemployment rate is equal to the natural rate,frictional and structural unemployment are zero.

Accepted Answer

The natural rate of unemployment includes frictional and structural unemployment that is inherent in a dynamic economy. It is not possible for these types of unemployment to be zero even when the overall unemployment rate is equal to the natural rate.

Question 6

The unemployment rate tends to move inversely with real GDP growth in an economy.

Accepted Answer

When real GDP grows, businesses typically hire more workers, thereby decreasing the unemployment rate. Conversely, during economic downturns or recessions, economic activity slows, businesses lay off workers and unemployment rises. Therefore, there typically is an inverse relationship between unemployment and real GDP growth.

Question 7

The natural unemployment rate tends to move inversely with real GDP growth in an economy.

Accepted Answer

The natural unemployment rate is primarily influenced by structural factors in the economy, such as technological changes and labor market policies, rather than by short-term fluctuations in real GDP growth.

Question 8

The natural unemployment rate fluctuates very little over time.

Accepted Answer

The natural unemployment rate is the rate at which the economy is at full employment, which is also called the non-accelerating inflation rate of unemployment (NAIRU). It is determined by structural factors such as demographics, technology, and institutions. While the natural unemployment rate is not fixed, it tends to be stable over time, within a narrow range of 4% to 6% in the United States. This stability is due to the fact that the long-run equilibrium in the labor market is governed by supply and demand factors that do not change rapidly or drastically. Therefore, the natural unemployment rate can be considered a relatively constant benchmark for assessing the health of the economy's job market.

Question 9

Over time,the actual unemployment rate varies around the natural rate.

Accepted Answer

The natural rate of unemployment is the rate of unemployment that exists when the economy is at full employment, with no cyclical unemployment. However, actual unemployment can vary from this rate due to various factors such as economic conditions, changes in demographics, and government policies. Therefore, the actual unemployment rate can be both above or below the natural rate over time.

Question 10

Most economists argue against increases in the minimum wage as a way to help the poor.Explain why most economists do not favor increases in the minimum wage to raise the living standards of low-income households.

Accepted Answer

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Question 11

The natural unemployment rate is the sum of the structural and frictional unemployment rates.

Accepted Answer

The natural unemployment rate (or non-accelerating inflation rate of unemployment, NAIRU) is typically defined as the unemployment rate that prevails when there is no cyclical unemployment, i.e. when the economy is operating at its potential output level. It consists of two components: structural unemployment, which reflects a mismatch between the skills and qualifications of workers and the requirements of available jobs, and frictional unemployment, which is the temporary unemployment that arises when workers are between jobs or are transitioning to a new one. Therefore, the natural unemployment rate is indeed the sum of these two rates.

Question 12

Why would the unemployment rate likely understate the overall decline in an economy's performance,especially in a recession?

Accepted Answer

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Question 13

Identify the effects of employment protection laws.

Accepted Answer

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Question 14

Explain the impact of discouraged workers on the official unemployment rate.

Accepted Answer

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Question 15

How do wage and employment regulations in Western Europe regarding unemployment benefits,minimum wages,and labor unions differ from those in the United States? How do those differences impact the rigidity of employment index?

Accepted Answer

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Question 16

Identify both the factors that can increase structural unemployment and the policies that can decrease it.

Accepted Answer

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Question 17

The widespread use of contraceptive pills is one of the major reasons for the increased female labor force participation rate after World War II.

Accepted Answer

The widespread availability of contraceptive pills gave women greater control over their reproduction, allowing them to more easily plan and space their pregnancies. This reduced the number of unplanned pregnancies, which in turn allowed women to pursue education and career opportunities without the interruption of pregnancy and childbirth. As a result, the increased availability of contraceptives has been identified as an important factor contributing to the rise in female labor force participation rates since World War II.

Question 18

The aging of the population typically results in a lower labor force participation rate as well as higher taxes for younger workers.

Accepted Answer

As the population ages, there are fewer people in the workforce and more people relying on government services such as healthcare and social security. This can lead to higher taxes for younger workers in order to support these programs. Additionally, older workers may retire earlier, further reducing the labor force participation rate.

Question 19

Explain the impact of unemployment benefits on the unemployment rate.

Accepted Answer

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Question 20

When the unemployment rate is equal to the natural rate,cyclical unemployment is zero.

Accepted Answer

When unemployment rate equals the natural rate, it means that the economy is in equilibrium and all factors of production are being utilized efficiently. Therefore, there is no cyclical unemployment as all workers who are seeking employment have found jobs.

Quiz 11: Unemployment and Labor Force Participation