Exam 28: Unemployment and Its Natural Rate

Measuring the amount of unemployment in the economy is a straightforward task.

Figure 28-2 ​ -Refer to Figure 28-2. What type of unemployment is measured by the differences between lines A and B?

People who report being unemployed but who, in fact, are working for "under the table" pay to avoid taxes on their earnings are really employed and therefore cause the reported unemployment rate to be higher than it would otherwise be.

Workers in unions reap the benefit of collective bargaining, while workers not in unions bear some of the cost.

When a minimum-wage law forces the wage to remain above the level that balances supply and demand, the quantity of labor supplied is lower and the quantity of labor demand is higher than at the equilibrium wage.

Over the past several decades, the difference between the labor-force participation rates of men and women in the U.S. has

How are discouraged workers counted in the unemployment rate?

Since unemployment rates are consistently higher in Canada and some Western European countries than in the United States, it appears that the natural rate of unemployment is lower in the United States. What might explain this difference?

Structural unemployment results when the number of jobs is insufficient for the number of workers.

To be counted as "employed" in the U.S. labor force statistics, a person

The labor force equals the sum of the employed and the unemployed.

The Bureau of Labor Statistics computes unemployment rates for the entire adult population and for groups based on age, gender, and race.

Within the U.S. population, women of prime working age (ages 25-54) have higher rates of unemployment than men of prime working age (ages 25-54), regardless of race.

Sam has no job but keeps applying to get a job with a business that is unionized. He is qualified and he finds the pay attractive, but the firm is not hiring. Sam is

Most spells of unemployment are short, and most unemployment observed at any given time is long term. How can this be?

Figure 28-3 ​ -Refer to Figure 28-3. Without a minimum wage, what is the equilibrium level of employment? Explain what happens to the level of employment if the minimum wage is equal to $125.

A firm might offer efficiency wages so its workers will eat a more nutritious diet and therefore be healthier and more productive.

A firm might offer efficiency wages in order to reduce shirking.

Sectoral shifts in demand for output

Adults who were not working but who had jobs from which they were temporarily absent are included in the Bureau of Labor Statistics' "employed" category.