Economics Flashcards - Unemployment Rate

Questions and Answers

The unemployment rate measures:

Unemployed workers as a percentage of the population age over sixteen.

Unemployed workers as a percentage of the labor force. (correct)

Unemployed workers as a percentage of the population.

The number of people unemployed divided by the number of people employed.

During the Great Depression of the 1930s, the unemployment rate reached more than:

85 %

25 % (correct)

65 %

45 %

Reginald looked for work for six months but could not find a job to his liking. He now spends time at the beach. For purposes of employment, he is considered:

Employed in the underground economy.

Unemployed.

Out of the labor force. (correct)

Underemployed.

Over time, the unemployment rate in the U.S. seems to return to a range of:

6 % - 8 % Signup and view all the answers

If the unemployment rate is 8 percent, this means:

8 percent of the labor force is unemployed. Signup and view all the answers

A welder who quits his job and moves from Pittsburgh to Madison to try to get a better welding job is said to be:

Frictionally unemployed Signup and view all the answers

Frictional unemployment is:

Unemployment that is due to normal turnover in the labor market. Signup and view all the answers

The type of unemployment that occurs because of a recession is called:

Cyclical unemployment. Signup and view all the answers

The definition of market equilibrium states that at the equilibrium wage, the quantity of labor demanded by employers will equal the quantity supplied. This is referred to as:

Equilibrium wage Signup and view all the answers

The rise in unemployment that occurs because of a recession is known as cyclical unemployment, because it is closely tied to the:

Business cycle Signup and view all the answers

The most significant real economic cost of high unemployment is:

The potential goods and services that might have been produced but weren't. Signup and view all the answers

Karen chooses to go to university full-time rather than to work. Karen:

Is not part of the labor force. Signup and view all the answers

The theory that argues that the productivity of workers will increase if more is paid to them, and so employers will often find it worthwhile to pay their employees somewhat more than market conditions might dictate is:

Efficiency wage theory Signup and view all the answers

Cyclical unemployment arises when:

Business activity in the macroeconomy declines. Signup and view all the answers

Frictional unemployment occurs when:

A worker decides to quit one job to seek a different job. Signup and view all the answers

A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as:

Cyclically unemployed. Signup and view all the answers

Insofar as government public policy is concerned, the best way to battle unemployment would be:

To minimize recessions. Signup and view all the answers

The labor force consists of:

All adults who are working or actively seeking work. Signup and view all the answers

Study Notes

Unemployment Rate Definitions and Measures

The unemployment rate is calculated as the percentage of unemployed workers in the labor force.
During the Great Depression, the unemployment rate exceeded 25% of the labor force.
Individuals like Reginald, who are not actively seeking jobs, are classified as out of the labor force.

Economic Trends and Unemployment

U.S. unemployment rates fluctuate with economic cycles, often returning to a range of 4-6% over time.
An 8% unemployment rate indicates that 8% of the labor force is unemployed, not the total population.

Types of Unemployment

Frictional unemployment occurs when workers voluntarily leave jobs to seek better opportunities.
Structural unemployment results from mismatches in skills and job requirements or lack of training.
Cyclical unemployment is linked to economic recessions and declines in business activity.

Labor Market Concepts

Market equilibrium occurs when the quantity of labor demanded equals the quantity supplied at the equilibrium wage.
The rise in unemployment during a recession is a reflection of the business cycle.

Economic Costs of Unemployment

The most significant economic cost of high unemployment includes potential goods and services not produced.
Additional costs may stem from retraining efforts for unemployed individuals and loss of tax revenue.

Labor Force Composition

The labor force comprises adults who are either employed or actively seeking work, excluding discouraged workers.
Government policies aimed at minimizing recessions are viewed as effective strategies for reducing unemployment.

Theories and Dynamics

Efficiency wage theory suggests that productivity may increase if employers pay higher wages, even beyond market conditions.
Frictional unemployment is also described as individuals quitting their current jobs to pursue different opportunities.

Definition of Key Terms

Cyclical Unemployment: Arises from downturns in economic activity.
Frictional Unemployment: Occurs due to natural labor market turnover.
Natural Rate of Unemployment: The normal level of unemployment in an economy independent of short-term fluctuations.
Equilibrium Wage: The wage at which labor supply equals labor demand.

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Description

This quiz focuses on key concepts related to the unemployment rate and its historical context during the Great Depression. Test your knowledge on what constitutes the unemployment rate and significant historical markers. Perfect for economics students looking to solidify their understanding.