Question 1

Defining and measuring the labor force is the most difficult part of measuring unemployment.

Accepted Answer

A) True 
 B)False

Question 2

An increase in the price level has no effect on labor supply.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is true?

Accepted Answer

A) Unemployment rates for young people in the United States are sometimes higher, sometimes lower, and sometimes the same as those for older people, depending on the cyclical fluctuations in the economy. 
B) Unemployment rates for young people in the United States are the same as those for older people. 
C) Unemployment rates for young people in the United States are lower than those for older people. 
D) Unemployment rates for young people in the United States are higher than those for older people. 
E) Unemployment among young people is not a problem in the United States. 
A) Unemployment rates for young people in the United States are sometimes higher, sometimes lower, and sometimes the same as those for older people, depending on the cyclical fluctuations in the economy. 
B) Unemployment rates for young people in the United States are the same as those for older people. 
C) Unemployment rates for young people in the United States are lower than those for older people. 
D) Unemployment rates for young people in the United States are higher than those for older people. 
E) Unemployment among young people is not a problem in the United States.

Question 4

According to the Current Population Survey, which of the following is the best example of an unemployed person?

Accepted Answer

A) Any person not working or not working as many hours as he or she would prefer 
B) Any person without a job while looking for work 
C) A person without a job 
D) Any person looking for work 
E) A person who decides to leave the labor force 
A) Any person not working or not working as many hours as he or she would prefer 
B) Any person without a job while looking for work 
C) A person without a job 
D) Any person looking for work 
E) A person who decides to leave the labor force

Question 5

Exhibit 20-1
  
-According to the data in Exhibit 20-1, aggregate hours equal

Accepted Answer

A) 252 billion. 
B) 351 billion. 
C) 234 million. 
D) 252 million. 
E) 234 billion. 
A) 252 billion. 
B) 351 billion. 
C) 234 million. 
D) 252 million. 
E) 234 billion.

Question 6

Using the supply-and-demand-for-labor analysis, explain why a firm that seeks to reduce job shirking and labor turnover may end up rationing jobs and creating unemployment.

Accepted Answer

Suppose, as shown in the figure below, t

Question 7

Which of the following explanations argues that, in order to prevent shirking and lower job turnovers, the real wage will be purposely kept above the equilibrium wage resulting in unemployment?

Accepted Answer

A) The efficiency-wage explanation 
B) The job-search explanation 
C) The insider-outsider explanation 
D) minimum-wage explanation 
A) The efficiency-wage explanation 
B) The job-search explanation 
C) The insider-outsider explanation 
D) minimum-wage explanation

Question 8

According to the textbook, Spain's low minimum wage as a percentage of the average wage

Accepted Answer

A) is strong evidence in support of the theory that high minimum wages cause unemployment among the young to rise. 
B) can be explained by the idea that the tradition of living at home is so strong in Spain that it offsets the effect of the low minimum wage. 
C) shows why differences in minimum wages across countries is a valid explanation for why the unemployment rate among young people varies. 
D) shows why lifestyle is not a valid explanation for why the unemployment rate among young people varies. 
E) demonstrates that Spain does not have an unemployment problem among its young. 
A) is strong evidence in support of the theory that high minimum wages cause unemployment among the young to rise. 
B) can be explained by the idea that the tradition of living at home is so strong in Spain that it offsets the effect of the low minimum wage. 
C) shows why differences in minimum wages across countries is a valid explanation for why the unemployment rate among young people varies. 
D) shows why lifestyle is not a valid explanation for why the unemployment rate among young people varies. 
E) demonstrates that Spain does not have an unemployment problem among its young.

Question 9

Which of the following statements is true about real wages?

Accepted Answer

A) Real wages increase as long as nominal wages decrease. 
B) Real wages increase as long as nominal wages increase. 
C) If prices rise faster than nominal wages, real wages will increase. 
D) If prices rise faster than nominal wages, real wages will decrease. 
E) Real wages increase as long as inflation increases. 
A) Real wages increase as long as nominal wages decrease. 
B) Real wages increase as long as nominal wages increase. 
C) If prices rise faster than nominal wages, real wages will increase. 
D) If prices rise faster than nominal wages, real wages will decrease. 
E) Real wages increase as long as inflation increases.

Question 10

Exhibit 20-1
  
-According to the data in Exhibit 20-1, if economic conditions change such that the unemployment rate declines to 4.5 percent, what is the new value of aggregate hours?

Accepted Answer

A) 211 billion hours per year 
B) 205 billion hours per year 
C) Aggregate hours will be unaffected. 
D) 241 billion hours per year 
E) 220 billion hours per year 
A) 211 billion hours per year 
B) 205 billion hours per year 
C) Aggregate hours will be unaffected. 
D) 241 billion hours per year 
E) 220 billion hours per year

Question 11

The unemployment rate, the labor force participation rate, and the employment-to-population ratio have the same measurement difficulties that the labor force does.

Accepted Answer

A) True 
 B)False

Question 12

According to the labor supply and demand model,

Accepted Answer

A) higher minimum wages have no effect on unemployment for young people with low skills. 
B) higher minimum wages will reduce unemployment among young people with low skills. 
C) minimum wages should not differ across countries. 
D) the higher the market wage is relative to the minimum wage, the higher the unemployment rate is among young people with low skills. 
E) the lower the market wage is relative to the minimum wage, the higher the unemployment wage is among young people. 
A) higher minimum wages have no effect on unemployment for young people with low skills. 
B) higher minimum wages will reduce unemployment among young people with low skills. 
C) minimum wages should not differ across countries. 
D) the higher the market wage is relative to the minimum wage, the higher the unemployment rate is among young people with low skills. 
E) the lower the market wage is relative to the minimum wage, the higher the unemployment wage is among young people.

Question 13

Which of the following explanations argues that laws requiring that wages be kept above a given amount prevent unemployed workers from being hired?

Accepted Answer

A) The insider-outsider explanation 
B) The job-search explanation 
C) The efficiency-wage explanation 
D) The discouraged-worker explanation 
E) The minimum-wage explanation 
A) The insider-outsider explanation 
B) The job-search explanation 
C) The efficiency-wage explanation 
D) The discouraged-worker explanation 
E) The minimum-wage explanation

Question 14

The natural unemployment rate is the unemployment rate

Accepted Answer

A) when the economy is in a recession. 
B) when real and potential GDP are equal. 
C) when the economy is in a boom. 
D) related to the business cycle. 
E) when real and nominal GDP are equal. 
A) when the economy is in a recession. 
B) when real and potential GDP are equal. 
C) when the economy is in a boom. 
D) related to the business cycle. 
E) when real and nominal GDP are equal.

Question 15

Suppose there is a decline in the price level. This means that

Accepted Answer

A) the real wage decreases, and firms are willing to hire more people. 
B) the real wage is unaffected by the inflation rate. 
C) the real wage increases, and firms are willing to hire more people. 
D) the real wage decreases, and firms are willing to hire fewer people. 
E) the real wage increases, and firms are willing to hire fewer people. 
A) the real wage decreases, and firms are willing to hire more people. 
B) the real wage is unaffected by the inflation rate. 
C) the real wage increases, and firms are willing to hire more people. 
D) the real wage decreases, and firms are willing to hire fewer people. 
E) the real wage increases, and firms are willing to hire fewer people.

Question 16

The natural unemployment rate is another name for the average rate of unemployment in the economy.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not adequately explained by the labor-supply-and-demand model?

Accepted Answer

A) The increase in the employed labor force during economic expansions 
B) The effect of lower wages on the incentive for firms to hire more people 
C) Why there is always some unemployment 
D) Why real wages rise during economic expansions 
E) The effect of higher wages on the incentive for people to work more hours 
A) The increase in the employed labor force during economic expansions 
B) The effect of lower wages on the incentive for firms to hire more people 
C) Why there is always some unemployment 
D) Why real wages rise during economic expansions 
E) The effect of higher wages on the incentive for people to work more hours

Question 18

Suppose that, in an attempt to reduce unemployment among unskilled workers and in particular young workers, the government introduces a "training" wage that is below the minimum wage and that can be used to hire new, unskilled workers. This wage would be paid for a period of up to six months, at which time the wage would have to be increased to at least the minimum level. Explain how this would reduce unemployment. Do you think unskilled workers would favor such a policy?

Accepted Answer

When the wage is lower, firms are willin

Question 19

Differences in unemployment rates among young people across countries reflect differences in cyclical activity.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following will cause unemployment from job search to decline?

Accepted Answer

A) Improving communications about the labor market 
B) Increasing unemployment compensation 
C) Lowering the minimum wage 
D) Increasing the minimum wage 
E) Increasing the bargaining strength of labor 
A) Improving communications about the labor market 
B) Increasing unemployment compensation 
C) Lowering the minimum wage 
D) Increasing the minimum wage 
E) Increasing the bargaining strength of labor

Exam 20: Unemployment and Employment

Defining and measuring the labor force is the most difficult part of measuring unemployment.

An increase in the price level has no effect on labor supply.

Which of the following is true?

According to the Current Population Survey, which of the following is the best example of an unemployed person?

Exhibit 20-1 -According to the data in Exhibit 20-1, aggregate hours equal

Using the supply-and-demand-for-labor analysis, explain why a firm that seeks to reduce job shirking and labor turnover may end up rationing jobs and creating unemployment.

Which of the following explanations argues that, in order to prevent shirking and lower job turnovers, the real wage will be purposely kept above the equilibrium wage resulting in unemployment?

According to the textbook, Spain's low minimum wage as a percentage of the average wage

Which of the following statements is true about real wages?

Exhibit 20-1 -According to the data in Exhibit 20-1, if economic conditions change such that the unemployment rate declines to 4.5 percent, what is the new value of aggregate hours?

The unemployment rate, the labor force participation rate, and the employment-to-population ratio have the same measurement difficulties that the labor force does.

According to the labor supply and demand model,

Which of the following explanations argues that laws requiring that wages be kept above a given amount prevent unemployed workers from being hired?

The natural unemployment rate is the unemployment rate

Suppose there is a decline in the price level. This means that

The natural unemployment rate is another name for the average rate of unemployment in the economy.

Which of the following is not adequately explained by the labor-supply-and-demand model?

Differences in unemployment rates among young people across countries reflect differences in cyclical activity.

Which of the following will cause unemployment from job search to decline?

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Monopoly

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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