Question 1

If the economy were at a steady-state unemployment rate with a separation rate of 0.02 per month and a job-finding rate of 0.10 per month, and the labor force was 100 million, how many individuals would lose their jobs each month?

Accepted Answer

The answer of If the economy were at a steady-state...

Question 2

More frequent holidays for workers in Europe than in the United States contribute to:

Accepted Answer

The statement suggests that workers in Europe have more frequent holidays than in the United States. Therefore, they work fewer hours per year on average than the average employed person in the United States. Therefore, option D is the best choice.

Question 3

Assume that a country experiences a reduction in productivity that shifts the labor demand curve downward and to the left. If the real wage were rigid, this would lead to:

Accepted Answer

If the real wage were rigid, it would not be able to adjust downwards to accommodate for the reduction in labor demand. As a result, employers would hire fewer workers, leading to a rise in unemployment.

Question 4

The model of the steady-state rate of unemployment assumes that the size of the labor force is fixed. If the size of the labor force is allowed to vary:

a. explain how the job-loss and job-finding processes will differ from the situation when the labor force is fixed.
b. explain how interpretations of changes in the unemployment rate will become less clear?

Accepted Answer

The answer of The model of the steady-state rate of...

Question 5

Which of the following is not a proposed explanation for that fact that Americans on average work 20 percent more hours than the typical resident of western Europe?

Accepted Answer

The underground economy being larger in America than in Europe is not a proposed explanation for why Americans work more hours. The other options (A, B, C) relate to cultural preferences, labor organization, and tax implications, which are commonly discussed factors influencing work hours between these regions.

Question 6

Earlier retirement in Europe than in the United States contributes to:

Accepted Answer

Earlier retirement in Europe means that a smaller percentage of the population is in the labor force, leading to a lower employment-to-population ratio in Europe than in the United States. This also means that there are fewer hours worked per year by the average employed person in Europe than in the United States since there are fewer employed people in Europe overall.

Question 7

Examples of "active" labor-market policies include all of the following except:

Accepted Answer

Unemployment insurance is considered a "passive" labor-market policy because it provides financial assistance to individuals who are already unemployed, rather than actively creating employment opportunities or improving individuals' job skills. The other options, job-search assistance, subsidized employment, and job-training programs, are all examples of "active" labor-market policies.

Question 8

Assume that an employer believes that the "efficiency" (e) it can get from a particular worker, as a function of the hourly wage (w), is given by function e = -0.125w + 0.15w² - 0.005w³, at least up to a wage of 30. a. Create a table of $w , e , e / w$, and $w / e$ for wages equal to $5,10,14,15,16,20$, and $25$, . b. Which wage gives the highest ratio of effici ency per unit of labor cost? c. Once the firm has hit on an optimal $w$, whatever it is, would cutting wages whenever demand falls off increase or decrease wages per unit of efficiency?

Accepted Answer

The answer of Assume that an employer believes that the...

Question 9

Assume that a country experiences a reduction in productivity that lowers the marginal product of labor for any given level of labor. In this case, the:

Accepted Answer

When there is a reduction in productivity, the labor demand curve shifts downward and to the left because firms are willing to hire fewer workers at any given wage rate. This means that there is a decrease in demand for labor. The labor supply curve remains unchanged.

Question 10

Changes in economic policies will frequently have an impact on the unemployment rate. Explain whether each of the policy changes described is likely to: (1) affect frictional or structural unemployment and (2) increase or decrease the measured unemployment rate.

a. The government reduces the number of weeks of unemployment insurance that unemployed workers can receive.
b. The government raises the minimum wage.
c. The government increases spending on job-training programs.

Accepted Answer

The answer of Changes in economic policies will frequently have...

Question 11

In recent years, Europe has experienced ______ unemployment than the United States, and employed Europeans work ______ hours than employed Americans.

Accepted Answer

Europe has generally experienced higher unemployment rates compared to the United States, and employed Europeans typically work fewer hours than their American counterparts, reflecting differences in labor market policies and work culture.

Question 12

Assume that a country experiences a reduction in productivity that shifts the labor demand curve downward and to the left. If the labor market were always in equilibrium, this would lead to:

Accepted Answer

A downward and leftward shift in the labor demand curve indicates that employers are willing to hire fewer workers at any given wage, leading to a decrease in the equilibrium wage. However, if the labor market is always in equilibrium, the quantity of labor supplied will adjust to the new demand, resulting in a new equilibrium with a lower real wage but no change in unemployment, as the quantity of labor demanded will equal the quantity of labor supplied at the new, lower wage.

Question 13

According to Blanchard, Europeans are more likely to use increases in real wages resulting from technological progress to increase ______, and Americans are more likely to use these increases in real wages to increase ______.

Accepted Answer

Blanchard states that Europeans are more likely to use increases in real wages resulting from technological progress to increase hours of leisure, while Americans are more likely to use these increases in real wages to increase consumption of goods and services. This is based on cultural and societal differences between the two regions.

Question 14

The generosity of unemployment insurance benefits is measured by:

Accepted Answer

The replacement rate and the duration of benefits are the primary factors that determine the generosity of unemployment insurance benefits. The replacement rate refers to the percentage of a worker's previous wages that are replaced by unemployment benefits, while the duration refers to how long a worker can continue to receive benefits. A higher replacement rate and longer duration are indicative of a more generous unemployment insurance program.

Question 15

Which of the following statements correctly describes European labor markets?

Accepted Answer

According to the statement, the average unemployment rate in Europe has been higher than the unemployment rate in the United States. Therefore, option B is the correct answer. Option A is incorrect because it makes an absolute statement that is not necessarily true. Option C is incorrect because it refers only to short-term and long-term unemployment rates in Europe and does not provide a comprehensive view of the labor markets. Option D is incorrect because it makes a generalized statement without providing evidence or examples to support it.

Question 16

Assume that a society consists of two types of workers. For type A, 3 million workers lose their jobs each year, and each one takes a year to find a new one. For type B, 36 million workers lose their jobs each year (3 million per month), and each takes one month to find a new job. Thus, at any given time, 6 million are unemployed in this economy.

a. How many "spells" of unemployment occur each year in this economy?
b. What percentage of the "spells" are only one month long?
c. If you take all the workers unemployed each year and multiply each by the length of his or her unemployment "spell," how many "months" of unempl oyment would there be in this economy each year?
d. Of all the "months" of unemployment, how many are accounted for by the workers unemployed ayear at a time?

Accepted Answer

The answer of Assume that a society consists of two...

Question 17

If the rate of separation is 0.02 and the rate of job finding is 0.08 but the current unemployment rate is 0.10, then the current unemployment rate is ______ the equilibrium rate, and in the next period it will move ______ the equilibrium rate.

Accepted Answer

The answer of If the rate of separation is 0.02...

Question 18

If the rate of job separation is 0.02 per month and the rate of job finding is 0.10 per month, what is the natural rate of unemployment?

Accepted Answer

The answer of If the rate of job separation is...

Question 19

Which of the following hypotheses is consistent with fewer hours worked per year in Europe than in the United States?

Accepted Answer

Higher tax rates in Europe than in the United States can lead to fewer hours worked per year in Europe because higher taxes reduce the net benefit of working additional hours, potentially making individuals less inclined to work more.

Question 20

If the underground economy is larger in Europe than in the United States, then the difference in the _____ number of hours worked between Europe and the United States may be smaller than the difference in the _____ numbers of hours worked.

Accepted Answer

The underground economy refers to economic activities that are not reported to the government, so they are not measured. Therefore, if the underground economy is larger in Europe, the measured number of hours worked in Europe may be lower than the actual number of hours worked, while in the United States, the difference between the measured and actual numbers of hours worked may be smaller. Thus, the difference in actual (unmeasured) numbers of hours worked may be smaller than the difference in measured numbers of hours worked.

Quiz 7: Unemployment and the Labor Market