Question 1

Why might a certain amout of frictional unemployment improve the efficiency of labor markets?

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Question 2

You are an employee of the Bureau of Labor Statistics involved in the monthly survey of households used to estimate the unemployment rate. In each of the following cases, classify the individual as employed, unemployed, or not in the labor force. Explain your classification.
(a) During the entire week containing the 12th of the month, Rosie the Riveter misses work simply because she didn't feel like going in to work.
(b) Jenny Wren is a volunteer 20 hours a week on a Rape Crisis telephone hotline. She feels she makes an important contribution to society and would not accept a paid job if one were offered to her.
(c) Cauley McCulkin is a hugely successful film star, age 12, who has earned over $5,000,000 each year for the past five years. Currently, Cauley is filming a new movie on location in Tenerife.
(d) Maxwell Edison, a full-time Ph.D. student, is involved in ground-breaking research in fiber optics. His dissertation advisor has already claimed that Maxwell's work will revolutionize telecommunications.
(e) Maggie Madd, 84, works 10 hours a week doing cleaning services for her son, Norman Neurotic. He pays her minimum wage.

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Question 3

Explain the major differences in the unemployment rate by demographic group.

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Question 4

Explain what is meant by the discouraged-worker effect?

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Question 5

What are the economic costs of unemployment?

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Question 6

Why is unemployment bad for society? Why is it bad for the individual or household?

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Question 7

You are an employee of the Bureau of Labor Statistics involved in the monthly survey of households used to estimate the unemployment rate. In each of the following cases, classify the individual as frictionally, structurally, or cyclically unemployed. Explain your classification.
(a) There has been a general economic slow down. Because of weak demand, Andy Capp has lost his portering job at the docks.
(b) Phil McCafferty, a newly qualified dental school graduate, is looking for a place to set up practice.
(c) Coal miner Ned Ludd is thrown out of work by the introduction of a more mechanized production process.
(d) Latosha Hogan, a computer programmer with a large bank, quit her job two months ago in search of a better-paid programming position. She is still looking.

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Question 8

For each of the following, indicate if the person would be classified as employed, unemployed, or not in the labor force 	(a) a 70-year-old man who left his job to help his daughter in her business for 10 hours a week, 	(b) a 20-year-old college student who is out of school for the summer and is looking for a job, 	(c) a 30-year-old woman with a Ph.D. in history who has not been able to find a teaching position and is driving a cab 30 hours a week, and 	(d) a 40-year-old steel worker who isn't working and has given up searching for a job.

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Question 9

If the national unemployment rate is 7%, does every region in the country have a 7% unemployment rate? Explain.

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Question 10

Discuss what is meant by the discouraged-worker effect. Explain whether the existence of the discouraged-worker effect causes the official unemployment rate to understate or overstate the "true" level of unemployment.

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Question 11

What changes might take place to reduce the number of discouraged workers?

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Question 12

During a press conference, the Secretary of Employment notes that the unemployment rate is 7.0%. As a political opponent, how might you criticize this figure as an underestimate? In rebuttal, how might the Secretary argue that the reported rate is an overestimate of unemployment?

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Question 13

Explain why it might be a fruitless endeavor for the government to attempt to reduce frictional unemployment.

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Question 14

Compare and contrast cyclical unemployment and natural unemployment

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Question 15

Explain the differences between the unemployment rate and the labor-force participation rate.

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Question 16

Explain what structural unemployment is and give some examples.

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Question 17

List and explain the three major types of unemployment.

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Question 18

What is the natural rate of unemployment and the current consensus estimate of economists?

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Question 19

Identify the following events as either increasing or decreasing the natural rate of unemployment.

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Question 20

How do the costs of unemployment differ in an economy with a large underground sector relative to one with a small underground sector?

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Quiz 7: Unemployment, Inflation, and Long-Run Growth