Question 1

An increase in the natural rate of unemployment would most likely result from an increase:

Accepted Answer

The natural rate of unemployment refers to unemployment that exists even when the economy is healthy and growing. One reason for this is when there is a mismatch between the skills of available workers and the requirements of the available jobs. An increase in the proportion of the labor force that is 16-19 years old would lead to an increase in the natural rate of unemployment because this group tends to have less work experience and fewer skills that are in demand by employers.

Question 2

Which of the following is likely to lead to a increase in aggregate demand?

Accepted Answer

Expansionary monetary policy involves lowering interest rates and increasing the money supply, which encourages borrowing and spending. This increase in consumer and investment spending leads to a rise in aggregate demand.

Question 3

Suppose GDP is currently below the full employment level. The most appropriate stabilization policy would be to:

Accepted Answer

To increase GDP, the most appropriate stabilization policy would be to increase the growth rate of the money supply. This would increase consumer spending and stimulate demand for goods and services, ultimately boosting economic growth. Increasing taxes or decreasing government spending would reduce consumer spending and have a contractionary effect on the economy, making it less likely to reach full employment. Increasing interest rates could also reduce consumer spending and investment, which would have a similar negative effect on the economy.

Question 4

Suppose GDP is currently at the full employment level. If aggregate demand falls, this will most likely lead to:

Accepted Answer

If aggregate demand falls, firms will produce less output to meet the reduced demand. This can result in a decrease in the demand for labor, leading to unemployment, which is the most likely scenario at full employment level.

Question 5

If full employment GDP is $6,000 billion and actual GDP is $5,500 billion, the economy is most likely experiencing:

Accepted Answer

Full employment GDP refers to the level of output produced when all available resources are being utilized, including labor. Actual GDP below this level suggests that there is not enough demand to employ all available labor, indicating a problem with unemployment.

Question 6

Which of the following groups is likely to have the highest unemployment rate?

Accepted Answer

Teenagers are typically new to the job market and lack experience, which can make it more difficult for them to find employment. Additionally, many teenagers are only seeking part-time or seasonal work, which can limit their job options and increase the likelihood of unemployment. In contrast, males and females are not necessarily more likely to experience unemployment, as it can vary based on factors such as education, experience, and job market conditions. Similarly, while Hispanics may face discrimination or language barriers that can impact their job prospects, this is not always the case and unemployment rates can vary among individuals and regions.

Question 7

Suppose the unemployment rate increases. Which of the following groups is likely to have the most adverse affect?

Accepted Answer

Historically, economic downturns and increases in the unemployment rate tend to disproportionately affect black communities more than other racial or ethnic groups. This is due to a variety of systemic factors, including but not limited to, disparities in education, access to opportunities, and discrimination in hiring practices.

Question 8

Jennifer has just graduated from college with a computer science degree. She is temporarily experiencing unemployment while she searches for a job. She would currently be:

Accepted Answer

Jennifer is experiencing frictional unemployment, which is the temporary unemployment that occurs when individuals are between jobs. This type of unemployment is considered normal and even necessary in a dynamic economy as it allows workers to search for better job opportunities and enables employers to find the best-suited workers for available positions.

Question 9

Robert has worked for the past twenty years on an assembly line at a General Motors plant. Recently Robert was laid off as robots were put on the line. Robert is experiencing:

Accepted Answer

Robert's job loss is a result of technological changes that have led to the replacement of human labor with robots. This is an example of structural unemployment, which occurs when the structure of the economy changes, making some jobs obsolete while creating new job opportunities in other sectors.

Question 10

Tamika worked as an accountant for the past twenty years in an accounting firm. Recently Tamika was laid off as the firm fully computerized the operations. Tamika is experiencing:

Accepted Answer

Tamika's job loss was due to the firm fully computerizing their operations, which is a form of structural change in the economy. This change led to her losing her job, which is an example of structural unemployment.

Question 11

Suppose GDP is currently at the full employment level. If authorities enact a tax decrease, this will lead to:

Accepted Answer

A tax decrease when the economy is at full employment typically leads to an increase in the price level due to demand-pull inflation, as consumers have more disposable income to spend, pushing demand beyond the economy's capacity to produce.

Question 12

Use the following diagram to answer the following questions.
 
-Refer to Diagram 13-1. Suppose the economy is currently in equilibrium at point A. If households decrease spending, this would most likely:

Accepted Answer

A decrease in household spending would lead to a leftward shift in the aggregate demand curve (from AD₁ to AD₂), which would cause unemployment to rise as firms reduce production in response to lower demand. This would also lead to a decrease in the equilibrium level of real GDP and the equilibrium price level, as the new equilibrium would be established at a lower point on the aggregate supply curve.

Question 13

Leslie was laid off her job because of cutbacks in production. At each place she applies for a job, she finds numerous other applicants. Leslie is most likely suffering from:

Accepted Answer

Leslie's situation is indicative of cyclical unemployment, which occurs due to downturns in the business cycle, leading to cutbacks in production and increased competition for available jobs.

Question 14

If taxes decrease, there will be:

Accepted Answer

When taxes decrease, consumers have more disposable income to spend on goods and services. This increase in disposable income leads to an increase in consumption spending, which increases aggregate demand. Therefore, choice C, an increase in aggregate demand, is the correct answer.

Question 15

Suppose at full employment, the level of GDP is $15 trillion. Currently output is $13.5 trillion. The most appropriate stabilization policy would be to:

Accepted Answer

Decreasing taxes can stimulate economic activity by increasing disposable income for consumers and investment capital for businesses, thereby helping to close the gap between the current output and the full employment level of GDP.

Question 16

Use the following information to answer the following questions.
 $ \begin{array}{lr}\text { Homemakers } & 55,000 \ \text { Retired Persons } & 25,000 \ \text { College Students } & 32,000 \ \text { Part-time Workers } & 39,120 \ \text { Full-time Workers } & 523,700 \ \text { Persons 16 years of age and older actively seeking employment } & 23,680 \ \text { Individuals on strike } & 5,500\end{array} $
-Refer to Homemakers. The number of persons in the civilian labor force is:

Accepted Answer

The civilian labor force includes full-time workers, part-time workers, and those actively seeking employment. Thus, 523,700 (full-time) + 39,120 (part-time) + 23,680 (seeking employment) = 586,500.

Question 17

If households and firms become pessimistic about the future of the economy:

Accepted Answer

If households and firms become pessimistic about the future of the economy, they may decrease their spending, leading to a decrease in aggregate demand. This decrease in demand can result in a decrease in production, and ultimately, unemployment.

Question 18

Which of the following would be most likely to suffer from unemployment?

Accepted Answer

The 17 year old male is more likely to suffer from unemployment as he is still in the early stages of his career and may lack the necessary experience and qualifications compared to the other options. Additionally, younger workers are more likely to work in industries that have been hit harder by the pandemic, such as hospitality or retail.

Question 19

Suppose GDP is currently at the full employment level. If authorities enact a tax increase, this will lead to:

Accepted Answer

Increasing taxes will likely decrease aggregate demand and therefore decrease overall economic activity which may lead to firms laying off workers and an increase in unemployment.

Question 20

Use the following information to answer the following questions.
 $ \begin{array}{lr}\text { Homemakers } & 55,000 \ \text { Retired Persons } & 25,000 \ \text { College Students } & 32,000 \ \text { Part-time Workers } & 39,120 \ \text { Full-time Workers } & 523,700 \ \text { Persons 16 years of age and older actively seeking employment } & 23,680 \ \text { Individuals on strike } & 5,500\end{array} $
-Refer to Homemakers. The unemployment rate is:

Accepted Answer

The unemployment rate for Homemakers can be calculated as (number of Homemakers seeking employment / total number of Homemakers) x 100. Therefore, the unemployment rate for Homemakers is (0 / 55,000) x 100 = 0 percent. Since the question asks for the unemployment rate, the correct answer is D) 4 percent, which is the overall unemployment rate for persons 16 years of age and older actively seeking employment.

Quiz 13: Unemployment: the Legacy of Recession, Technological Change, and Free Choice