Deck 33: Jobs and Unemployment

Question 1

Using Okun's rule of thumb, if trend growth is 2 percent and the unemployment rate rises by 0.5 percent, output would be expected to have:

A)fallen by 1 percentage point.
B)risen by 1 percentage point.
C)fallen by 2 percentage points.
D)risen by 2 percentage points.

Answer 1

risen by 1 percentage point.

Question 2

The program suggested by the textbook author provides a job for everyone.

Answer 2

False

Question 3

According to Okun's rule of thumb, if trend growth is 2 percent, and unemployment increases from 6 percent to 8 percent, what would be expected to occur with respect to income?

A)Income would fall by 4 percent.
B)Income would rise by 4 percent.
C)Income would fall by 2 percent.
D)Income would rise by 2 percent.

Answer 3

Income would fall by 2 percent.

Question 4

Okun's rule of thumb states that a:

A)2 percentage point rise in the unemployment rate will tend to be associated with a 1 percent fall in output from its trend and vice versa.
B)2 percentage point rise in the unemployment rate will tend to be associated with a 1 percent rise in output from its trend and vice versa.
C)1 percentage point rise in the unemployment rate will tend to be associated with a 2 percent fall in output from its trend and vice versa.
D)1 percentage point rise in the unemployment rate will tend to be associated with a 2 percent rise in output from its trend and vice versa.

Question 5

Other things equal, the higher the reservation wage, the more likely one is to be unemployed.

Question 6

Using Okun's rule of thumb, if trend growth is 3 percent and the unemployment rate rises by 2 percentage points, output would be expected to have:

A)fallen by 1 percentage point.
B)risen by 1 percentage point.
C)fallen by 2 percentage points.
D)risen by 2 percentage points.

Question 7

Which age group tends to have the highest unemployment rates?

A)16- to 19-year-olds
B)20- to 24-year-olds
C)25- to 54-year-olds
D)65 and over

Question 8

According to Okun's rule of thumb, if trend growth is 3 percent, and unemployment decreases from 5 percent to 4 percent, income would be expected to:

A)fall by 4 percent.
B)rise by 5 percent.
C)fall by 2 percent.
D)rise by 2 percent.

Question 9

Which of the following groups tend to have the highest unemployment rates?

A)Blacks
B)Whites
C)Asians
D)Latinos

Question 10

Using Okun's rule of thumb, if trend growth is 3 percent and the unemployment rate falls by 0.5 percent, output would be expected to have:

A)fallen by 2 percentage point.
B)risen by 2 percentage point.
C)fallen by 4 percentage points.
D)risen by 4 percentage points.

Question 11

The duration of unemployment rose significantly during the 2008/09 recession, relative to previous recessions.

Question 12

Someone who believes in the social responsibility framework believes that the standard measure of unemployment underestimates the level of unemployment.

Question 13

Today people have 7-10 jobs over their lifetime.

Question 14

Using Okun's rule of thumb, if trend growth is 3 percent and the unemployment rate rises by 0.5 percent, output would be expected to have:

A)fallen by 1 percentage point.
B)risen by 1 percentage point.
C)fallen by 2 percentage points.
D)risen by 2 percentage points.

Question 15

In the United States, potential output in the long run tends to:

A)remain constant.
B)rise at a trend rate of 2.25 to 3.5 percent per year.
C)fluctuate between 4.5 and 5.5 percent per year.
D)decline at a trend rate of 7.5 to 8.5 per year.

Question 16

Jamaal lost his job when a mechanical device replaced people with his skills. If Jamaal's skills are non-transferable, he would be considered to be structurally unemployed.

Question 17

In today's globalized economy, a U.S. worker's reservation wage tends to be lower than the reservation wage of many workers in developing countries.

Question 18

Cyclical unemployment is caused by fluctuations in economic activity.

Question 19

Someone who believes in the individual responsibility framework believes that the standard measure of unemployment underestimates the level of unemployment.

Question 20

According to Okun's rule of thumb, if trend growth is 2 percent and the economy is producing at an annual rate of $5 trillion, a decrease in the rate of unemployment from 7 percent to 6 percent would be expected to be associated with which of the following changes in income?

A)Income would fall by $100 billion.
B)Income would rise by $100 billion.
C)Income would fall by $200 billion.
D)Income would rise by $200 billion.

Question 21

Cyclical unemployment results from:

A)fluctuations in economic activity.
B)structural changes in the economy.
C)changes in technology.
D)the aging of the population.

Question 22

According to Okun's rule of thumb, if trend growth is 3 percent and the economy is producing at an annual rate of $7 trillion, if the rate of unemployment rises from 6 percent to 8 percent, income would be expected to:

A)fall by $140 billion.
B)rise by $140 billion.
C)fall by $70 billion.
D)rise by $70 billion

Question 23

What will likely lower structural unemployment?

A)People lower their reservation wages.
B)The labor force participation rate rises.
C)The Fed sells bonds.
D)The economy expands.

Question 24

Unemployment caused by a recession is called:

A)frictional unemployment.
B)cyclical unemployment.
C)natural unemployment.
D)structural unemployment.

Question 25

Globalization, accompanied by large trade deficits, most likely raises:

A)utilized unemployment.
B)cyclical unemployment.
C)the target rate of unemployment.
D)frictional unemployment.

Question 26

Mexico can produce vine-ripened tomatoes at a lower opportunity cost than firms in the United States. Through trade negotiations, the United States lifted quotas limiting the import of tomatoes from Mexico. Some firms in Florida, in the face of this new competition, had to close their farms and let go their workers. Many of the workers could not find new jobs right away. What type of unemployment describes the workers' situation?

A)Cyclical unemployment
B)Full unemployment
C)Structural unemployment
D)Target unemployment

Question 27

A reservation wage that is higher than the equilibrium wage creates:

A)structural unemployment.
B)cyclical unemployment.
C)target unemployment.
D)potential unemployment.

Question 28

Which of the following types of unemployment is considered to be the most controllable through demand-side macroeconomic policy?

A)Frictional unemployment
B)Natural unemployment
C)Cyclical unemployment
D)Structural unemployment

Question 29

What will likely lower cyclical unemployment?

A)Workers move to the nontradable sector.
B)The Fed sells bonds.
C)The economy expands.
D)Okun's law changes.

Question 30

Technological change can result in:

A)structural unemployment.
B)natural unemployment.
C)cyclical unemployment.
D)seasonal unemployment.

Question 31

The target rate of unemployment can be affected by all of the following except the:

A)level of output.
B)population's age structure.
C)social and institutional structure.
D)relationship between inflation and unemployment.

Question 32

The target rate of unemployment:

A)remains always at 0 percent.
B)remains always at 2 percent.
C)remains always at 5 percent.
D)can change over time.

Question 33

In 2001, the U.S. economy entered a recession and unemployment rose. Which one of the following types of unemployment was most likely caused by the recession?

A)Cyclical unemployment
B)Full unemployment
C)Structural unemployment
D)Seasonal unemployment

Question 34

Workers at a car-manufacturing plant are let go because automated machinery has been installed that requires fewer employees to operate. What type of unemployment describes the workers' situation?

A)Cyclical unemployment
B)Full unemployment
C)Structural unemployment
D)Frictional unemployment

Question 35

Structural unemployment:

A)includes cyclical unemployment.
B)is generally greater than cyclical unemployment.
C)is generally less than cyclical unemployment.
D)cannot be reduced with demand side policies.

Question 36

The wage a person requires before accepting a job is referred to as the ________ wage:

A)compensating
B)minimum
C)reservation
D)psychological

Question 37

News Story: Workers at a car-manufacturing plant in Flint, Michigan, are laid off because the economy is weak and GM cars are not selling well. GM isn't sure when the plant will reopen. What type of unemployment describes the workers' situation?

A)Cyclical unemployment
B)Full unemployment
C)Structural unemployment
D)Frictional unemployment

Question 38

Which of the following institutional changes would tend to reduce the target rate of unemployment?

A)Greater ease with which families may support unemployed family members
B)The aging of the population
C)The availability of unemployment insurance
D)The increased incidence of two-earner families

Question 39

Cyclical unemployment:

A)includes structural unemployment.
B)is generally greater than structural unemployment.
C)is generally less than structural unemployment.
D)can be reduced with demand side policies.

Question 40

Structural unemployment is caused by:

A)a general downturn in the economy.
B)people quitting a job just long enough to look for and find another one.
C)people over 65 who don't really want to work.
D)people losing a job when their skills become obsolete due to technological innovations.

Question 41

Which of the following groups would be eligible for the author's job program?

A)Students
B)Immigrants
C)Nonstudents
D)Retirees

Question 42

If a politician adheres to the individual responsibility framework, which of the following would not be mentioned in their campaign manifesto?

A)The unemployed are not looking hard enough for a job.
B)The unemployed are too picky in their job requirements.
C)The unemployed lack the entrepreneurial spirit.
D)The unemployed deserve jobs at respectable wages.

Question 43

Immigration is

A)bad for all citizens in the United States.
B)good for all citizens in the United States.
C)both good and bad for the U.S. economy.
D)is neither good nor bad for citizens in the United States.

Question 44

Which of the following has been an effect of globalization and a large trade deficit?

A)Increased wages in the tradable sector.
B)Increased employment in the tradable sector.
C)Decreased employment in the tradable sector.
D)Increased wages in the immigrant sector.

Question 45

With respect to the unemployment problem, social responsibility framework economists generally take the position that:

A)government should guarantee each person a satisfying and high-paying job.
B)government should eliminate only frictional unemployment.
C)each person should have a job commensurate with their training or past job experience.
D)individuals should be responsible for finding their own jobs.

Question 46

A decline in the number of immigrants into the United States would most likely reduce:

A)frictional unemployment.
B)the number of discouraged workers.
C)cyclical unemployment.
D)the target rate of unemployment.

Question 47

Globalization has:

A)lowered the target rate of unemployment.
B)raised the target rate of unemployment.
C)lowered cyclical unemployment.
D)raised cyclical unemployment.

Question 48

It can be argued that the minimum jobs proposal is preferable to a minimum wage law because:

A)it provides more job opportunities to women.
B)it cannot be overturned by the federal government.
C)it puts a floor on the wage as well as on the nature of the job.
D)it applies to students and nonstudents.

Question 49

With respect to the unemployment problem, individual responsibility framework supporters generally take the position that:

A)government should guarantee each person a job.
B)government should eliminate structural and cyclical unemployment.
C)each person should have a job commensurate with their training or past job experience.
D)individuals should be responsible for finding their own jobs.

Question 50

Which of the following has not been an effect of globalization and a large trade deficit?

A)Lower wages in the tradable sector than there otherwise would have been.
B)Lower employment in the tradable sector than there otherwise would have been.
C)Significant decline in wages and unemployment in the nontradable sector.
D)An increase in income disparities.

Question 51

Why does the minimum jobs program pay a maximum of $10 an hour?

A)To limit the number of people who will participate.
B)To provide a living wage to all those who participate.
C)To provide an attractive alternative to dangerous jobs.
D)To compete with the Federal minimum wage of $7.25 per hour.

Question 52

A jobs program that offers higher wages to those with higher education:

A)is better than a jobs program that offers equal wages to all.
B)is worse than a jobs program that offers equal wages to all.
C)raises the costs of the program.
D)lowers the cost of the program.

Question 53

If a politician adheres to the social responsibility framework, which of the following would not be mentioned in their campaign manifesto?

A)Unskilled workers should not have to accept jobs below a living wage.
B)Part-time workers who would like to work full time cannot find it.
C)People with enormous education and training cannot find a job that uses their skills.
D)Individuals who are unemployed can create their own jobs.

Question 54

Why didn't unemployment rise during the 2000s, even though the economy faced more and more globalization?

A)Globalization meant higher exports and lower imports, which created jobs.
B)The government ran policies that created jobs in the nontradable sector.
C)Firms hired workers because they lowered their reservation wages.
D)Immigration policies meant immigrants took jobs Americans weren't willing to take.

Question 55

The jobs program suggested by the author was put forward in order to:

A)argue against the individual responsibility framework.
B)argue against the social responsibility framework.
C)provide a middle ground approach to solving the unemployment problem.
D)sell a new book that he is publishing that deals with eliminating unemployment.

Question 56

According to the individual responsibility framework, which of the following would be most likely counted as unemployed?

A)A person graduates from a job-training program but cannot find a job.
B)A person has a lower reservation wage than the equilibrium wage and cannot find a job.
C)A person has a higher reservation wage than the equilibrium wage and cannot find a job.
D)A person who has looked for a job for 24 months and can't find one.

Question 57

Why would students be prevented from joining the minimum jobs program?

A)They would be considered overqualified.
B)They would be judged as unreliable.
C)They would overwhelm the system looking for summer work.
D)They possess too much intelligence to join this program.

Question 58

Globalization has tended to:

A)lower people's reservation wage.
B)raise people's reservation wage.
C)lower people's expectational wage.
D)raise people's expectational wage.

Question 59

Over the past several years, the target rate of unemployment has risen. Which of the following would not be used to explain this?

A)Congress passed a bill that requires the target rate to rise along with rising government deficits.
B)The workforce is getting younger.
C)More women have entered the workforce.
D)Government has expanded income support programs.

Question 60

The fact that more women have entered the labor force has:

A)raised the target rate of unemployment.
B)lowered the target rate of unemployment.
C)raised cyclical unemployment.
D)lowered cyclical unemployment.

Question 61

Should the unemployment rate be considered a normative or positive concept?

Question 62

Why doesn't the minimum jobs proposal provide output directly useful to the marketplace?

A)The monitoring costs of such a job would be too high.
B)If it did, it might be replacing jobs otherwise provided by the market.
C)It would provide training to participants better provided by other programs.
D)To compete with the Federal minimum wage of $7.25 per hour.

Question 63

Do you agree with the proposition: Eliminating unemployment would be an enormous gain for humankind?

Question 64

Explain why truly entrepreneurial people can never be unemployed.

Question 65

Which framework for thinking about unemployment is correct: the individual responsibility framework or the social responsibility framework?

Question 66

If trend growth is zero and if unemployment falls by 3%,by how much would you expect output to rise? (Use Okun's rule of thumb. )

Question 67

What would you expect to happen to potential output as reservation wages fall? Why?

Question 68

Suppose an economy currently has total output of $7 trillion,trend growth is 3%,and the unemployment rate of 4%.Using Okun's rule of thumb,how would the level of output change if unemployment decreased to 3.5%?

Question 69

If the guaranteed jobs program outlined in the book were implemented,would any firm pay a wage below the guaranteed job wage? Why might it do so?

Question 70

Define Okun's rule of thumb.

Question 71

What type of unemployment would you expect fiscal policy to be most effective against?

Question 72

What changes would you suggest to the guaranteed job proposal in the book to make it more politically acceptable? (Note that there are many right answers to this question.The one offered here is one example. )

Question 73

What happened to the duration of unemployment during the 2008/09 recession? What is the likely reason?

Question 74

What would you expect unemployment insurance to do to the target unemployment rate?

Question 75

In what sense is the guaranteed jobs program preferable to a minimum wage proposal?

Question 76

Why doesn't the minimum job proposal offer jobs commensurate with people's skills and education?

A)The monitoring costs of such a job would be too high, because people will claim to have high skills when they really don't.
B)These people can find such jobs in the marketplace because their skills are valued, making them in high demand.
C)The proposal doesn't believe these people provide more productive skills that other workers.
D)These people are holding out for a job in the marketplace. Providing them with jobs wouldn't be offering a minimum job, which is the program's objective.

Question 77

Would the guaranteed jobs proposal outlined in the book likely significantly affect the pay of (1)waiters (2)dishwashers, (3)teachers, (4)investment bankers, (5)hotel support staff, (6)student interns?

Question 78

What role has globalization played in increasing the target unemployment rate? What other factors have affected the target rate?