Question 1

Cyclical unemployment is:

Accepted Answer

Cyclical unemployment refers to the increase in unemployment that occurs during economic downturns or recessions, as businesses reduce production and lay off workers.

Question 2

In an economy of 100 people in the labor force, if 10 people are unemployed for 4 weeks during the year, and 30 people are unemployed for 8 weeks during the year, and the rest are employed continuously throughout the year, then the average duration of unemployment in this economy is:

Accepted Answer

To find average duration of unemployment, count the number worker-weeks that the unemployed were out of work and divide by the number of unemployed. In this case: (10 × 4)+ (30 × 8)= 280/40 = 7.

Question 3

Data for an economy shows that the unemployment rate is 10%, the participation rate 80 percent, and 200 million people 16 years or older are not in the labor force.How many people are in the labor force in this economy?

Accepted Answer

The participation rate is the percentage of the working-age population that is part of the labor force. If 200 million people are not in the labor force, then 80% of the working-age population is in the labor force. Therefore, the total working-age population is 200 million / (1 - 0.8) = 1 billion. The labor force is 80% of 1 billion, which is 800 million.

Question 4

Data for an economy shows that the unemployment rate is 10%, the participation rate 80 percent, and 200 million people 16 years or older are not in the labor force.How many people are in the working-age population in this economy?

Accepted Answer

The working-age population includes those in the labor force and those not in the labor force. If 200 million are not in the labor force and the participation rate is 80%, then the labor force is 80% of the working-age population. Let X be the working-age population: 0.8X = labor force. Since 200 million are not in the labor force, X - 0.8X = 200 million, so 0.2X = 200 million, thus X = 1 billion.

Question 5

Frictional unemployment is:

Accepted Answer

Frictional unemployment refers to short-term unemployment that arises as a result of the process of matching workers with job openings. It occurs when workers are searching for jobs, either because they are entering the job market for the first time or because they have changed jobs, and it takes time for them to find suitable employment. This type of unemployment is considered to be natural and necessary for a healthy labor market.

Question 6

Data for an economy show that the unemployment rate is 6 percent, the participation rate 60 percent, and 200 million people 16 years or older are not in the labor force.How many people are unemployed this economy?

Accepted Answer

Since the participation rate is 60 percent, 40 percent are not participating in the labor market. So the 200 million people are not participating represent 40 percent of the working-age population, or (0.40x)= 200,000,000, where x is the working-age population. Then x = 200,000,000/0.40 = 500,000,000, or 500 million. With 200 million of these 500 million people being outside the labor force, there must be 300 million in the labor force. Unemployment is 6 percent of 300 million, or 18.0 million.

Question 7

The number of unemployed divided by the labor force equals the:

Accepted Answer

The formula for calculating the unemployment rate is the number of unemployed individuals divided by the labor force, multiplied by 100. Therefore, the correct answer is option C, which is the unemployment rate.

Question 8

In a small town of 100 people, there are 10 children under 16, 10 retired people, 60 people with full-time jobs, 3 people with part-time jobs, 3 full-time students over 16, and 4 full-time homemakers.The remaining people did not have jobs, but wanted them.What is the participation rate in this town?

Accepted Answer

The answer of In a small town of 100 people,...

Question 9

Data for an economy show that the unemployment rate is 6 percent, the participation rate is 60 percent, and 200 million people 16 years or older are not in the labor force.How many people are in the working-age population in this economy?

Accepted Answer

To calculate the working-age population, we need to add the number of people in the labor force and the number of people not in the labor force. 
Labor force = unemployment rate x working-age population
60% = (working-age population - 200 million) / working-age population
0.6 = 1 - 200 million / working-age population
0.4 = 200 million / working-age population
working-age population = 500 million 
Therefore, the working-age population in this economy is 500 million.

Question 10

The towns of Jekyll and Hyde each have a labor force of 2,000 people.In Jekyll, 500 people were unemployed for the entire year, while the rest of the labor force was employed continuously.In Hyde, every member of the labor force was unemployed for three months and was employed for nine months.The average duration of unemployment spells over the year was ______ months in Jekyll and ______ months in Hyde.

Accepted Answer

An unemployment spell is the average duration of unemployment per worker. In Jekyll, workers were out of work for 12 months, on average, whereas in Hyde it averaged 3 months.

Question 11

Workers whose spells of unemployment are broken up by brief periods of employment or withdrawal from the labor force are referred to as ______ workers

Accepted Answer

Workers whose spells of unemployment are broken up by brief periods of employment or withdrawal from the labor force are referred to as chronically unemployed workers.

Question 12

Data for an economy show that the unemployment rate is 6 percent, the participation rate 60 percent, and 200 million people 16 years or older are not in the labor force.How many people are employed in this economy?

Accepted Answer

Since the participation rate is 60 percent, 40 percent are not participating in the labor market. So the 200 million people are not participating represent 40 percent of the working-age population, or (0.40x)= 200,000,000, where x is the working-age population. Then x = 200,000,000/0.40 = 500,000,000, or 500 million. With 200 million of these 500 million people being outside the labor force, there must be 300 million in the labor force. Unemployment is 6 percent of 300 million, or 18.0 million. Thus, 300 million minus 18 million equals 282 million employed.

Question 13

Who from among the following is counted as employed?

Accepted Answer

Ray is considered employed because he is working, even if it is part-time and not the full hours he desires.

Question 14

Income lost by the unemployed is an example of the ______ cost of unemployment, while the additional spending to control crime is an example of the _____ cost of unemployment.

Accepted Answer

Unemployment creates more than just economic costs such as lost income, it also causes social costs such as by hiring more police to control crime.

Question 15

People who say that they would like to have a job, but have not made an effort to find a job in the past four weeks, are called ______ workers.

Accepted Answer

Discouraged workers are those who have given up search for a job as they believe no job is available for them. They are not counted as unemployed as they are not actively seeking employment.

Question 16

The labor force divided by the working age population equals the:

Accepted Answer

The labor force divided by the working age population equals the participation rate, which is the percentage of the working age population that is either employed or actively seeking employment. It is not the same as the unemployment rate (A), which is the percentage of the labor force that is unemployed. It is also not the employment rate (B), which is the percentage of the working age population that is employed. The population rate (D) is not a commonly used economic term.

Question 17

The duration of an unemployment spell is a measure of the:

Accepted Answer

The duration of an unemployment spell refers to the length of time that a spell of unemployment lasts, making option B the correct answer. Option A is incorrect because it describes the financial impact of being unemployed, rather than the time frame. Option C is incorrect because it describes the frequency of unemployment, not the duration of each individual spell. Option D is incorrect because it describes the total number of unemployed workers, rather than the length of each individual's unemployment spell.

Question 18

Who of the following would be considered a discouraged worker?

Accepted Answer

A discouraged worker is someone who has given up looking for work because they believe no jobs are available. Frank fits this description as he has not looked for work because of this belief. The other choices are not discouraged workers as they are actively seeking employment or are employed, even if it may not be their ideal situation.

Question 19

Structural unemployment is:

Accepted Answer

Structural unemployment is caused by fundamental shifts in an economy, such as technological changes or globalization, leading to a mismatch between the skills workers have and the skills needed for available jobs. It persists even when the economy is healthy.

Question 20

Depression and lost self-esteem are examples of the ______ costs of unemployment, while the lost income and tax revenue are examples of the ______ costs of unemployment.

Accepted Answer

Unemployment creates more than just economic costs such as lost income and tax revenue, it also causes psychological costs such as lost self-esteem among others.

Quiz 6: Wages and Unemployment