Question 1

When the economy is operating at the natural rate of unemployment:

Accepted Answer

The natural rate of unemployment includes frictional and structural unemployment, but cyclical unemployment is zero when the economy is at this rate.

Question 2

U.S. steelworkers who have lost their jobs to workers receiving lower wages overseas are part of _____ unemployment.

Accepted Answer

Structural unemployment occurs when changes in the structure of the economy, such as technological advances or outsourcing of jobs, make certain skills or industries no longer in demand. In this case, the loss of steelworker jobs to overseas workers receiving lower wages is an example of structural unemployment.

Question 3

Frictional unemployment occurs when job openings:

Accepted Answer

Frictional unemployment occurs when there are job openings and people willing to take them, but it takes time for job seekers and employers to find each other and match appropriately.

Question 4

Which of the following is NOT a reason unemployment rates differ so much within the United States?

Accepted Answer

Cultural differences are not a primary factor in unemployment rate variations; economic factors like industry clustering and tax differences are more influential.

Question 5

The natural rate of employment:

Accepted Answer

The natural rate of employment is associated with the non-accelerating inflation rate of unemployment (NAIRU), where inflation expectations are stable, meaning the actual inflation rate equals people's expectations.

Question 6

Which of the following statements is incorrect?

Accepted Answer

The natural rate of unemployment is not associated with maximum inflationary pressures; rather, it is the level of unemployment where the economy is at full employment, with only frictional and structural unemployment present, and no cyclical unemployment.

Question 7

Which of the following statements is (are) true? I. If cyclical unemployment is 0%, then the unemployment rate equals the natural rate of unemployment.
II) The unemployment rate consists of only frictional or structural unemployment.
III) An unemployment rate of zero percent is generally considered the equivalent of full employment.

Accepted Answer

Cyclical unemployment is the deviation from the natural rate, so if it is 0%, the unemployment rate equals the natural rate, which includes frictional and structural unemployment. Full employment does not mean 0% unemployment, as frictional and structural unemployment still exist.

Question 8

Suppose an economist breaks the unemployment rate into the following components: frictional (2%), structural (1%), and cyclical (4%). Based on these estimates, the natural rate of unemployment is:

Accepted Answer

The natural rate of unemployment is the sum of the frictional and structural unemployment rates. So in this case, the natural rate of unemployment is 2% + 1% = 3%. The cyclical unemployment rate is not included in the natural rate because it represents the temporary fluctuations in unemployment that occur as a result of changes in the business cycle.

Question 9

When the economy is operating at full employment:

Accepted Answer

At full employment, cyclical unemployment is zero because the economy is operating at its natural rate of unemployment, which includes only frictional and structural unemployment.

Question 10

Full employment:

Accepted Answer

Full employment occurs when cyclical unemployment is zero, meaning the economy is operating at its natural rate of unemployment, which includes only frictional and structural unemployment.

Question 11

Which of the following pairs is NOT synonymous?

Accepted Answer

Cyclical unemployment and full employment are not synonymous. Cyclical unemployment refers to the unemployment that results from economic downturns, while full employment is a situation where all available labor resources are being used in the most economically efficient way.

Question 12

Suppose the unemployment rate is 10% and an economist breaks the unemployment rate into the following components: frictional (3%) and structural (3%). Based on these estimates, the cyclical inflation rate is:

Accepted Answer

The cyclical unemployment rate is calculated by subtracting the frictional and structural unemployment rates from the overall unemployment rate. 
Cyclical unemployment rate = Unemployment rate - Frictional unemployment rate - Structural unemployment rate 
= 10% - 3% - 3% 
= 4% 
Therefore, the correct answer is B) 4%.

Question 13

If actual unemployment is at its natural rate:

Accepted Answer

When actual unemployment is at its natural rate or the Non-Accelerating Inflation Rate of Unemployment (NAIRU), inflation is very low. This is because the economy is operating at its full potential and there is little to no upward pressure on wages and prices. As a result, the central bank may choose to maintain lower interest rates to stimulate economic growth.

Question 14

With everything else held constant, if 5% of those considered to be frictionally unemployed found work while the number of people considered to be structurally unemployed increased by 5%, the natural rate of unemployment:

Accepted Answer

The natural rate of unemployment is the sum of frictional and structural unemployment. If 5% of frictionally unemployed find work, frictional unemployment decreases. However, if structural unemployment increases by 5%, the changes offset each other, leaving the natural rate unchanged.

Question 15

The nonaccelerating inflation rate of unemployment is the unemployment rate associated with ____ inflation and _____ unemployment.

Accepted Answer

The nonaccelerating inflation rate of unemployment (NAIRU) is the level of unemployment at which inflation does not accelerate, typically associated with low inflation and low unemployment.

Question 16

During the 1970s, when handheld calculators became popular and replaced slide rules in performing computations, workers in the slide rule industry lost their jobs. These workers' unemployment status is:

Accepted Answer

The workers in the slide rule industry lost their jobs due to a structural change in the economy, as new technology replaced traditional methods. This type of unemployment is known as structural unemployment.

Question 17

With everything else held constant, if society increased the efficiency of matching people to jobs that need their skills, the natural rate of unemployment would likely:

Accepted Answer

Improving the efficiency of matching people to jobs reduces frictional unemployment, which is a component of the natural rate of unemployment, thus decreasing the natural rate.

Question 18

Which of the following would be considered frictional unemployment? I. Alisha has taken a job at a different company in order to accept a promotion. She quit her current job but has one month off until she starts her new job.
II) John has lost his job as a book binder as the demand for e-books has replaced demand for traditional books in the country.
III) Melissa quit her full-time job to become a full-time student in order to pursue her Ph.D.

Accepted Answer

Frictional unemployment occurs when individuals are temporarily unemployed while transitioning between jobs or entering the workforce. Alisha's situation fits this definition as she is between jobs.

Question 19

Unemployed workers who voluntarily quit their jobs to search for a better position are categorized as _____ unemployed.

Accepted Answer

Frictional unemployment occurs when people are temporarily unemployed while switching from one job to another. Workers who voluntarily quit their jobs to search for better employment opportunities fall under this category of unemployment.

Question 20

Cyclical unemployment occurs when:

Accepted Answer

Cyclical unemployment occurs during economic downturns when there is a decrease in demand for goods and services, causing businesses to lay off workers. Choice A refers to regular unemployment, while choice B and D refer to other types of reasons for leaving the labor force.

Quiz 6: Measuring Inflation and Unemployment