ECON 202 Chapter 9 Quiz

Questions and Answers

Which of the following statements correctly differentiates between unemployed workers and discouraged workers?

Unemployed workers refer to the skilled workers who have been laid off, while discouraged workers refer to the unskilled workers who have lost their jobs.

Unemployed workers are counted in the labor force, but discouraged workers are excluded from the labor force. (correct)

Unemployed workers do not have a paid job, while discouraged workers have a paid job.

The unemployment benefits received by unemployed workers are not capped, while the unemployment benefits received by discouraged workers are capped at a maximum.

Which of the following explains why frictional unemployment exists in an economy?

It arises because most of the workers don’t work very hard in their jobs, thus producing friction between employers and employees.

It arises because unemployment benefits encourage workers not to look for jobs.

It arises because it takes time for an unemployed worker to find a firm with a well-matched job vacancy. (correct)

It arises because job search is completely a supply-side phenomenon in the labor market, and firms make no attempts to advertise for the vacancies they have.

If the working-age population in an economy increases, while the size of the labor force remains unchanged, ________.

The natural rate of unemployment will increase

The labor force participation rate will increase

The labor force participation rate will remain unaffected

The labor force participation rate will fall (correct)

Wages that are above the wage that workers would be willing to accept, where the premium is paid to increase worker productivity, are referred to as:

Efficiency wages. Signup and view all the answers

Ameer just quit his job as a shoe salesman and is looking for work as an accountant, which is what his college degree is in. Ameer would be considered:

Frictionally unemployed. Signup and view all the answers

The natural rate of unemployment means that

Only frictional, structural, and classical (real-wage) unemployment exist. Signup and view all the answers

Policies that make it more difficult to fire an employee are likely to:

Lead to greater unemployment. Signup and view all the answers

An increase in the minimum wage causes the quantity supplied of labor to _, the quantity demanded of labor , and thus causes a __________ of labor.

Increase; decrease; surplus Signup and view all the answers

Discouraged workers are classified by the BLS as?

Out of the labor force Signup and view all the answers

If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, how many workers are in the labor force?

1 million Signup and view all the answers

If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, what is the labor force participation rate?

95% Signup and view all the answers

Members of the military are currently not included in the employment, labor force, and working-age population statistics. What impact would including members of the military in these statistics have on the unemployment rate and the labor force participation rate?

Including members of the military would reduce the unemployment rate and increase the labor force participation rate. Signup and view all the answers

People who lost their jobs as hand-drawn animators because of the popularity of computer-generated 3D animation are examples of persons who are suffering?

Structural unemployment Signup and view all the answers

Sarah is a full-time student who is not looking for work. What kind of unemployment is Sarah experiencing?

Sarah is not experiencing unemployment of any kind because she is not currently part of the labor force. Signup and view all the answers

Which of the following is an example of a worker experiencing cyclical unemployment?

A Freightliner employee that got laid off because of the recession of 2001. Signup and view all the answers

An increase in cyclical unemployment will result in?

An increase in the unemployment rate. Signup and view all the answers

Establishing a state employment agency that speeds up the process of matching unemployed workers with unfilled jobs is an attempt to lower?

Frictional unemployment. Signup and view all the answers

Minimum wage laws cause unemployment because the legal minimum wage is set?

Above the market wage, causing the quantity of labor demanded to be less than the quantity of labor supplied. Signup and view all the answers

Suppose that 100 people that were officially classified as 'unemployed' quit looking for work in order to go back to school full-time. This change will cause?

A decrease in the unemployment rate and a decrease in the labor force participation rate. Signup and view all the answers

Which of the following has a tendency to reduce the unemployment rate?

Decreasing unemployment insurance in an economy. Signup and view all the answers

In January of 2001, the population of the United States was 276.8 million, the working-age population was 210.2 million, the total number of people 'employed' and 'unemployed' was 145.0 million, and the total number of unemployed people was 5.5 million. What was the unemployment rate?

3.8 percent Signup and view all the answers

If the number of unemployed workers is 50 million, the number in the working-age population is 500 million, and the unemployment rate is 12.5%, what is the labor force participation rate?

80% Signup and view all the answers

Rosina Gonzales quit her job in Pennsylvania and moved to California to be close to her family. She is currently looking for work, so she would be considered?

Frictionally unemployed. Signup and view all the answers

How would you best describe a manufacturing employee who has been fired because he was replaced by a robot (new technology) and does not have the skills necessary to help operate the robot?

Structurally unemployed Signup and view all the answers

An increase in frictional unemployment will result in?

An increase in the unemployment rate. Signup and view all the answers

The labor demand curve?

Is provided by firms who want to hire workers at each given wage. Signup and view all the answers

The labor supply curve?

Shows that all things being equal, more workers will want to work when wages are higher, and less will want to work when wages are lower. Signup and view all the answers

An economic slowdown would cause the labor?

Demand curve to shift left. Signup and view all the answers

When growth goes down, unemployment tends to go?

Up shortly after, and vice versa. Signup and view all the answers

We don’t typically see wages in response to an economic downturn because .

fall; they are 'sticky,' and are slow to respond to shifts in the economy. Signup and view all the answers

Which of the following is not the result of wage stickiness in an economic downturn?

A shortage of labor. Signup and view all the answers

The trade-offs in the effect of unemployment insurance are?

It prolongs the job search, but reduces the number of job searches a person has to make. Signup and view all the answers

We would expect that policies to protect workers would?

Lead to greater unemployment. Signup and view all the answers

Employers choose to offer efficiency wages because?

All of these are true. Signup and view all the answers

Which of the following causes the unemployment rate to overstate the true extent of joblessness?

A drug dealer reports herself as unemployed. Signup and view all the answers

Economists say that the economy is at 'the natural rate of unemployment' when?

Cyclical unemployment is zero. Signup and view all the answers

Which of the following has a tendency to raise the unemployment rate?

Increasing the minimum wage in an economy. Signup and view all the answers

Which of the following is an example of a worker experiencing structural unemployment?

An assembly line worker who loses his job because of automation. Signup and view all the answers

Suppose that you suspect that the number of 'discouraged workers' has increased over the last year. Which of the following pieces of information would support your suspicion?

The labor force participation rate has fallen over the last year. Signup and view all the answers

In a recession, the number of 'discouraged workers' is likely to _. Thus, the actual unemployment situation is likely __ the official unemployment numbers tell us during the recession.

increase; worse than Signup and view all the answers

Which of the following causes the unemployment rate to overstate the true extent of joblessness?

More than one of the above causes the unemployment rate to overstate the true extent of joblessness. Signup and view all the answers

The demand for refrigerators falls when the economy enters a downturn. If a refrigerator manufacturer lays off workers during an economic downturn, this would be an example of?

Cyclical unemployment. Signup and view all the answers

Bill has graduated with his degree in economics. Through Career Services, he submitted his resume to several companies and he will visit them during the next two weeks. Bill is considered?

Frictionally unemployed. Signup and view all the answers

If there is frictional unemployment, then the number of available jobs is __________ the number of available workers.

Both of the above are possible Signup and view all the answers

Suppose that an economy moves from a recession to an expansion. As the economy improves, the number of discouraged workers likely _. This change in the number of discouraged workers, other things equal, causes the unemployment rate to __.

Decreases; increase Signup and view all the answers

For which type(s) of unemployment is it possible that the number of available workers and the number of available jobs are equal?

Both frictional and structural unemployment. Signup and view all the answers

In general, economists believe that the measured unemployment rate _________________ the actual amount of joblessness in the economy.

Understates Signup and view all the answers

The natural rate of unemployment means that?

Only frictional, structural, and classical (real-wage) unemployment exist. Signup and view all the answers

The advice to 'keep searching, there are plenty of jobs around here for which you are qualified,' would be most appropriate for which of the following types of unemployment?

Frictional unemployment. Signup and view all the answers

Which of the following is correct?

Adults not in the labor force = adult population - employed workers - unemployed workers. Signup and view all the answers

If the number of unemployed workers is 30 million, the number in the working-age population is 500 million, and the unemployment rate is 10%, what is the labor force participation rate?

Calculate based on given information. Signup and view all the answers

Study Notes

Labor Force and Unemployment Classifications

Discouraged workers are classified as out of the labor force by the BLS.
The labor force includes all employed and unemployed individuals actively seeking work.
A decrease in the labor force participation rate signals a growing number of discouraged workers.

Unemployment Rate Calculations

Unemployment rate is calculated as the number of unemployed divided by the labor force.
A rise in discouraged workers can lead to a decrease in the overall unemployment rate but doesn't reflect actual joblessness.
Example: If there are 19 million unemployed individuals in a working-age population of 500 million with an unemployment rate of 4%, the labor force is determined to be 475 million.

Types of Unemployment

Frictional unemployment occurs when individuals are temporarily out of work while transitioning between jobs.
Structural unemployment arises due to shifts in the economy that render skills obsolete (e.g., automation).
Cyclical unemployment results from economic downturns, affecting overall demand for labor.

Economic Impact and Trends

An increase in cyclical unemployment leads to a higher overall unemployment rate.
Policies to reduce frictional unemployment include improving job matching through employment agencies.
Economic slowdowns typically shift the labor demand curve leftward, indicating reduced labor demand.

Government Influence on Employment

Minimum wage laws can create unemployment if set above the equilibrium wage, as they may lead to a surplus of labor.
Unemployment insurance can prolong job searches, affecting the number of job offers made.
State actions to support workers, such as decreased unemployment insurance, may reduce unemployment rates.

Measurement and Misclassification of Unemployment

The unemployment rate may overstate joblessness, as not all jobless individuals are included in official counts.
Economic conditions can influence classifications; during recessions, the number of discouraged workers typically increases.
Economists often assert that the measured unemployment rate underrepresents true joblessness.

Labor Market Dynamics

Workers and employers adjust hiring based on wages—higher wages often attract more job seekers.
Frictional and structural unemployment can coexist, maintaining a balance between available jobs and workers.
Efficiency wages incentivize employees to perform better, reduce turnover, and increase productivity.

Conclusion on Employment Dynamics

The natural rate of unemployment reflects ongoing frictional and structural unemployment, where cyclical unemployment is minimal.
As economies improve, discouraged workers may re-enter the labor force, impacting reported unemployment rates.
Understanding these dynamics is critical for policy development aimed at reducing unemployment.### Labor Force Participation Rate
A decrease in the labor force participation rate indicates fewer individuals are engaged in the labor market.
An increase in the labor force participation rate suggests more individuals are entering or remaining in the workforce.

Efficiency Wages

Efficiency wages refer to wages that exceed the minimum a worker would accept to boost productivity.
These higher wages can lead to increased employee morale, reduced turnover, and greater overall productivity.

Frictional Unemployment

Frictional unemployment occurs when individuals are temporarily out of work while transitioning to a new job that better fits their skills or preferences.
Ameer, who is seeking a new job as an accountant after quitting as a shoe salesman, exemplifies frictional unemployment.

Natural Rate of Unemployment

The natural rate of unemployment encompasses only frictional, structural, and classical (real-wage) unemployment; cyclical unemployment is not included.
It reflects the long-term rate of unemployment in a functioning economy where supply and demand for labor are in balance.

Impact of Employment Policies

Policies that make it more difficult to terminate employees tend to lead to a rise in overall unemployment.
Such regulations can create a rigid labor market, potentially discouraging hiring due to the costs associated with removing employees.

Minimum Wage Effects

An increase in the minimum wage typically results in a higher quantity supplied of labor, as more individuals are willing to work at prevailing wage rates.
Conversely, the quantity demanded for labor often decreases as employers may hire fewer workers at the higher wage, leading to a surplus of labor in the market.

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Test your knowledge on key concepts from Chapter 9 of ECON 202. This quiz includes questions on labor statistics, unemployment classifications, and related economic principles. Perfect for reviewing important terms and calculations.

ECON 202 Chapter 9 Quiz

Questions and Answers

Which of the following statements correctly differentiates between unemployed workers and discouraged workers?

Which of the following explains why frictional unemployment exists in an economy?

If the working-age population in an economy increases, while the size of the labor force remains unchanged, ________.

Wages that are above the wage that workers would be willing to accept, where the premium is paid to increase worker productivity, are referred to as:

Ameer just quit his job as a shoe salesman and is looking for work as an accountant, which is what his college degree is in. Ameer would be considered:

The natural rate of unemployment means that

Policies that make it more difficult to fire an employee are likely to:

An increase in the minimum wage causes the quantity supplied of labor to _______, the quantity demanded of labor ______, and thus causes a ______________ of labor.

Discouraged workers are classified by the BLS as?

If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, how many workers are in the labor force?

If the number of unemployed workers is 19 million, the number in the working-age population is 500 million, and the unemployment rate is 4%, what is the labor force participation rate?

Members of the military are currently not included in the employment, labor force, and working-age population statistics. What impact would including members of the military in these statistics have on the unemployment rate and the labor force participation rate?

People who lost their jobs as hand-drawn animators because of the popularity of computer-generated 3D animation are examples of persons who are suffering?

Sarah is a full-time student who is not looking for work. What kind of unemployment is Sarah experiencing?

Which of the following is an example of a worker experiencing cyclical unemployment?

An increase in cyclical unemployment will result in?

Establishing a state employment agency that speeds up the process of matching unemployed workers with unfilled jobs is an attempt to lower?

Minimum wage laws cause unemployment because the legal minimum wage is set?

Suppose that 100 people that were officially classified as 'unemployed' quit looking for work in order to go back to school full-time. This change will cause?

Which of the following has a tendency to reduce the unemployment rate?

In January of 2001, the population of the United States was 276.8 million, the working-age population was 210.2 million, the total number of people 'employed' and 'unemployed' was 145.0 million, and the total number of unemployed people was 5.5 million. What was the unemployment rate?

If the number of unemployed workers is 50 million, the number in the working-age population is 500 million, and the unemployment rate is 12.5%, what is the labor force participation rate?

Rosina Gonzales quit her job in Pennsylvania and moved to California to be close to her family. She is currently looking for work, so she would be considered?

How would you best describe a manufacturing employee who has been fired because he was replaced by a robot (new technology) and does not have the skills necessary to help operate the robot?

An increase in frictional unemployment will result in?

The labor demand curve?

The labor supply curve?

An economic slowdown would cause the labor?

When growth goes down, unemployment tends to go?

We don’t typically see wages ________ in response to an economic downturn because ________.

Which of the following is not the result of wage stickiness in an economic downturn?

The trade-offs in the effect of unemployment insurance are?

We would expect that policies to protect workers would?

Employers choose to offer efficiency wages because?

Which of the following causes the unemployment rate to overstate the true extent of joblessness?

Economists say that the economy is at 'the natural rate of unemployment' when?

Which of the following has a tendency to raise the unemployment rate?

Which of the following is an example of a worker experiencing structural unemployment?

Suppose that you suspect that the number of 'discouraged workers' has increased over the last year. Which of the following pieces of information would support your suspicion?

In a recession, the number of 'discouraged workers' is likely to _______________. Thus, the actual unemployment situation is likely ________________ the official unemployment numbers tell us during the recession.

Which of the following causes the unemployment rate to overstate the true extent of joblessness?

The demand for refrigerators falls when the economy enters a downturn. If a refrigerator manufacturer lays off workers during an economic downturn, this would be an example of?

Bill has graduated with his degree in economics. Through Career Services, he submitted his resume to several companies and he will visit them during the next two weeks. Bill is considered?

If there is frictional unemployment, then the number of available jobs is __________ the number of available workers.

Suppose that an economy moves from a recession to an expansion. As the economy improves, the number of discouraged workers likely _________. This change in the number of discouraged workers, other things equal, causes the unemployment rate to __________.

For which type(s) of unemployment is it possible that the number of available workers and the number of available jobs are equal?

In general, economists believe that the measured unemployment rate _________________ the actual amount of joblessness in the economy.

The natural rate of unemployment means that?

The advice to 'keep searching, there are plenty of jobs around here for which you are qualified,' would be most appropriate for which of the following types of unemployment?

Which of the following is correct?

If the number of unemployed workers is 30 million, the number in the working-age population is 500 million, and the unemployment rate is 10%, what is the labor force participation rate?

Study Notes

Labor Force and Unemployment Classifications

Unemployment Rate Calculations

Types of Unemployment

Economic Impact and Trends

Government Influence on Employment

Measurement and Misclassification of Unemployment

Labor Market Dynamics

Conclusion on Employment Dynamics

Efficiency Wages

Frictional Unemployment

Natural Rate of Unemployment

Impact of Employment Policies

Minimum Wage Effects

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An increase in the minimum wage causes the quantity supplied of labor to _, the quantity demanded of labor , and thus causes a __________ of labor.

We don’t typically see wages in response to an economic downturn because .

In a recession, the number of 'discouraged workers' is likely to _. Thus, the actual unemployment situation is likely __ the official unemployment numbers tell us during the recession.

Suppose that an economy moves from a recession to an expansion. As the economy improves, the number of discouraged workers likely _. This change in the number of discouraged workers, other things equal, causes the unemployment rate to __.