Chapter 7 The Macroeconomy: Unemployment, Inflation, and Deflation 21
87) A discouraged worker is someone who
A) has been fired. B) is unemployed.
C) is not in the labor force. D) is employed.
88) One criticism of the unemployment rate is that it
A) does not include the number of discouraged workers as unemployed.
B) does not include people who are not working and are not looking for work.
C) counts a new entrant that is actively seeking work as unemployed.
D) is a stock measure.
89) The unemployment rate will decrease when
A) the duration of unemployment increases.
B) the average workweek falls from 40 to 39 hours.
C) the age of the labor force increases.
D) people get discouraged and quit looking for work.
90) The percentage of the noninstitutionalized working age individuals who are employed or
seeking work is known as
A) the labor force.
B) the labor force participation rate.
C) discouraged worker.
D) the stock of employed and unemployed workers.
91) An increase in the labor force participation rate
A) implies that the unemployment rate must fall.
B) implies that the unemployment rate must rise.
C) means there are more discouraged workers.
D) is consistent with either a rise or a fall in the unemployment rate.
92) The labor force participation rate is the
A) proportion of the noninstitutionalized adult population in the labor force.
B) proportion of the labor force that is employed.
C) proportion of the labor force that is unemployed.
D) proportion of the noninstitutionalized adult population that is employed.
93) The major change in American labor markets this century is
A) the steady rise of the unemployment rate.
B) the steady rise of the employment rate.
C) the increase in the female labor force participation rate.
D) the increase in the labor force participation rate.
94) Which of the following would NOT be a factor that has contributed to the rising female labor
force participation rate?
A) Greater access to education
B) Greater access to training
C) Increasing family size
D) Reduction of barriers to competing with men for jobs
95) In a small country, the adult population equals 5,000. There are 4,000 people in the labor force
and 3,000 people are employed. The labor force participation rate equals
A) 25 percent.
B) 80 percent.
C) 30 percent.
D) an undetermined amount given the lack of information.
96) In a small country, the adult population equals 10,000. There are 3,000 people unemployed and
4,000 people are employed. The labor force participation rate equals
A) 70 percent.
B) 57 percent.
C) 40 percent.
D) an undetermined amount given the lack of information.
97) In a small country, there are 5,000 people in the labor force and 3,000 people are employed. The
labor force participation rate equals
A) 40 percent.
B) 60 percent.
C) 62.5 percent.
D) an undetermined amount given the lack of information.
98) To be counted in the labor force,
A) a person has to be working at least 40 hours per week.
B) a person has to be at least 16 or older, have a job, or if unemployed has to be actively
seeking employment.
C) a person, irrespective of his or her age, has to be working or, if out of work, actively
seeking employment.
D) a person has to be over 16 years of age, irrespective of whether she or he is actively seeking
work.
99) To be counted as unemployed in the United States a person has to be
A) at least 16 and out of work.
B) at least 16, out of work, and actively seeking employment.
C) at least 16 and less than 65 and actively seeking employment.
D) out of work and actively seeking employment.
100) All of the following are examples of a flow EXCEPT
A) a new entrant into the labor force.
B) an individual who voluntarily leaves the labor force.
C) a person who is fired from a job.
D) the current unemployment rate.
101) A person who is currently not working and has stopped looking for a job because he or she is
convinced there is no job available is classified as a
A) discouraged worker. B) disgruntled worker.
C) depressed worker. D) dissatisfied worker.
102) The labor force participation rate is
A) the percentage of the population who are in the labor force.
B) the percentage of the non institutionalized working age population who is in the labor
force.
C) the percentage of the non institutionalized population who is in the labor force.
D) the percentage of the entire population who is in the labor force.
103) Since 1950, the labor force participation rate in the United States
A) of men and women both increased.
B) of men increased and women decreased.
C) of men and women both decreased.
D) of men decreased and for women increased.
104) Which one of the following statements is true?
A) The existence of unemployment places the economy at a point inside its production
possibilities curve.
B) The unemployment rate is the percentage of the population not working.
C) To be counted as part of the labor force, an individual must be working more than 40
hours a week.
D) The sum of wages lost by all unemployed workers gives an accurate, comprehensive
estimate of the total cost of unemployment.
105) During the Great Depression,
A) the unemployment rate was not unusually high, but wage levels were low.
B) unemployment statistics were not collected.
C) the U.S. unemployment rate reached its historical highest.
D) most people who couldn t find work left the labor force, so the official unemployment rate
remained low.
106) Which one of the following individuals is NOT counted as unemployed?
A) a recent college graduate currently without any employment and looking for her first
full time job
B) a 35 year old woman fired from her prior work because of poor performance and looking
for another job
C) a 50 year old woman laid off from her former job because of a downturn in the
company s sales and looking for another job
D) a 22 year old aspiring actress currently without any show business employment, but
working temporarily as a waitress while she auditions for acting jobs
107) The average duration of unemployment across the labor force is about
A) 25 weeks. B) 15 weeks. C) 8 weeks. D) 4 weeks.
108) What is the definition of a discouraged worker?
A) a member of the labor force who is working but is discouraged about his prospects for
advancement within the company
B) a member of the labor force who is working but is discouraged about the performance of
his company within the industry
C) a person who has dropped out of the labor force because he is discouraged about his
prospects for employment
D) an employed member of the labor force who is discouraged about his pay
109) Which one of the following accurately describes the trends in U.S. labor force participation over
the past 50 years?
A) The labor force participation rate of men has climbed from about 75 percent to 90 percent.
B) The labor force participation rate of women has climbed from below 40 percent to about 60
percent
C) The labor force participation rates for both men and women have declined.
D) The overall labor force participation rate has held steady at about 85 percent.
110) Is it possible for the unemployment rate to rise at the same time that the number of people
working increases?
A) No
B) Yes, if the new workers are employed less than full time
C) Yes, if labor force growth outpaces growth in the number of people working
D) Yes, if established workers keep their jobs but no longer have the option of working
overtime
111) Which one of these factors plays a role in determining the extent and duration of frictional
unemployment?
A) the ease with which job seekers can obtain information about job openings
B) the degree to which the overall level of business activity fluctuates up and down
C) the extent to which government legislation requires firms to provide health insurance for
employees
D) the education and skill levels of labor force participants
112) The labor force in the United States includes
A) discouraged workers.
B) those over the age of 16 who are employed or are seeking employment.
C) those between ages 12 and 16 who are actually working.
D) all of the above.
Total population 745,000
Working age population 550,000
Number employed 361,000
Number of unemployed 19,000
113) Using the above table, the employment rate is
A) 65.6 percent. B) 48.5 percent. C) 95.0 percent. D) 69.1 percent.
114) Using the above table, the unemployment rate X is
A) 2.6 percent. B) 5.0 percent. C) 3.5 percent. D) 2.1 percent.
115) Using the above table, the labor force is
A) 380,000. B) 911,000. C) 930,000. D) 569,000.
116) Using the above table, the labor force participation rate is
A) 65.6 percent. B) 73.8 percent. C) 81.8 percent. D) 69.1 percent.
117) Unemployment statistics are often criticized for
A) understating the number of people out of work, because discouraged workers are
excluded in the statistics.
B) overstating the number of people out of work, because retirees are included in the
statistics.
C) understating the number people out of work, because full time college students are
excluded.
D) overstating the number of people out of work, because the unemployment statistics
include all low income workers.
118) If Tim works at home taking care of the household,
A) he is part of the labor force. B) he is not part of the labor force.
C) he is considered to be employed. D) he is considered to be unemployed.
119) Which of the following would be considered a member of the labor force?
A) an engineer who has been laid off a year ago and since then has not looked for work
B) an inmate in a state prison making license plates
C) a person in a mental institution
D) a computer programmer looking for work
120) Which of the following people would be considered unemployed assuming that they are
actively seeking employment?
A) those who were fired from their job B) those who resigned from their job
C) new entrants into the job market D) All of the above are correct.
121) The highest measured rate of unemployment in the United States occurred during
A) the post WWII years. B) the Panic of 1893.
C) the Carter administration. D) the Great Depression.
122) Which of the following groups would NOT be considered as part of the civilian labor force?
A) full time students who are not working or looking for work
B) those already employed
C) those who are unemployed
D) all individuals only working part time
123) Assuming there are 150 million people employed in the United States and 5 million people
unemployed, the unemployment rate would therefore approximately equal
A) 2.22 percent. B) 3.23 percent. C) 4.4 percent. D) 10.1 percent.
124) Discouraged workers
A) would be considered as unemployed.
B) would not be considered as unemployed.
C) would be considered as part of the labor force.
D) would, according to some, tend to skew the unemployment rate upward.
125) The definition of a job loser is an individual
A) who quits his job voluntarily.
B) whose employment was terminated involuntarily due to a downturn in the economy.
C) who competed for a promotion at his company and did not get it.
D) who is underemployed.
126) The definition of a job leaver is an individual
A) who terminates his job voluntarily in order to work for a family business.
B) whose employment was terminated involuntarily.
C) who competed for a promotion at his company and did not get it.
D) who is underemployed.
127) Since 1950, it can be observed that the female participation rate in our labor force has
A) increased. B) decreased.
C) stayed constant. D) moved erratically up and down.
128) An individual who has stopped looking for a job because he is convinced that he cannot find a
job is referred to as
A) a contingent worker. B) a productive worker.
C) a discouraged worker. D) an unemployed worker.
129) Annie had a job as a human resource manager of a restaurant chain that went out of business
due to a downturn in the economy. She looked for work for six months and gave up because she
was convinced that she could not find a suitable job to fit her skill set. In this instance she would
be counted as a
A)
j
ob leaver. B) reentrant.
C) discouraged worker. D) labor force participant.
130) With regard to employment status, the adult population is divided into what three groups?
How is it determined whether someone is in the labor force or not?
131) What are the four criteria used by the Bureau of Labor Statistics to determine whether an
individual is unemployed or not?
132) Who are discouraged workers, and how do they affect labor force participation and
unemployment rates?
133) Distinguish between a stock and a flow. How do these concepts relate to unemployment?
134) If the duration of unemployment increases, what happens to the unemployment rate, other
things being equal? Why?
135) What is unemployment and what is the unemployment rate? What are the costs of
unemployment?
7.2 The Major Types of Unemployment
1) Frictional unemployment will always exist since
A) some workers will always want to make a job transition.
B) the capitalist system promotes unemployment.
C) mismatches in skills will always exist.
D) the U.S. economy will continue to shrink.
2) Suppose that Matt quits a job with the XYZ Corporation in order to look for more rewarding
employment. Matt would be
A) counted as still being employed.
B) included in the economy s hidden employment.
C) counted as frictionally unemployed.
D) counted as cyclically unemployed.
3) If a person loses her job because her abilities and skills are a poor match with current
requirements of employers, this person is considered
A) structurally unemployed. B) frictionally unemployed.
C) a discouraged worker. D) seasonally unemployed.
4) If a person is fired for poor performance but possesses skills required to obtain another job after
some searching, this person is considered
A) seasonally unemployed. B) frictionally unemployed.
C) structurally unemployed. D) a discouraged worker.
5) Bob s assembly line job has been replaced by robots, and Bob lacks abilities and skills required
to attain other jobs. He is considered
A) structurally unemployed. B) frictionally unemployed.
C) seasonally unemployed. D) a discouraged worker.
6) Collin has lost his job with a telemarketing company, which has moved its operation to India.
Collin is considered
A) structurally unemployed. B) frictionally unemployed.
C) seasonally unemployed. D) a discouraged worker.
7) Many economists would argue that some frictional unemployment
A) creates massive economic disruptions and should be eliminated as quickly as feasible.
B) should be eliminated whatever the cost.
C) no longer exists because increased unemployment benefits have generally solved this
problem.
D) cannot and probably should not be eliminated.
8) Frictional unemployment would increase when
A) migrant workers are unemployed after harvest season.
B) the number of individuals who quit one job to find another increases.
C) discouraged workers drop out of the work force.
D) workers are replaced by machines in production.
9) A recent accounting graduate from a major business school is searching for a place to begin his
career as an accountant. This individual is
A) structurally unemployed. B) seasonally unemployed.
C) cyclically unemployed. D) frictionally unemployed.
10) When an individual is frictionally unemployed, the unemployment arises from
A) a short term elimination of jobs because of a slowdown in business activity.
B) imperfect labor market information which requires individuals to search for appropriate
employment.
C) the permanent elimination of jobs because of a change in the structure of the economy.
D) a reduction in the overall demand for labor s skills.
11) Which one of the following individuals would be classified as structurally unemployed?
A) Bennett lost his construction job because there was a reduction in the number of houses
built during the winter of 2010.
B) Gail lost her job with the state because there was a reduction in the state budget.
C) Tommy lost his job when the steel mill where he worked closed because domestic
producers would not produce as efficiently and cheaply as foreign firms.
D) Fay lost her job in early January when the Christmas store where she worked closed.
12) The fact that a number of lifeguards lose their jobs at the end of each summer would be counted
as
A) cyclical unemployment. B) frictional unemployment.
C) seasonal unemployment. D) structural unemployment.
13) A lifeguard who is out of work in the winter is
A) frictionally unemployed. B) structurally unemployed.
C) cyclically unemployed. D) seasonally unemployed.
14) An example of a frictionally unemployed individual is
A) Charles, who has lost his job as an auto worker because of increased imports.
B) Mary, who quit her job to find work closer to her home.
C) Sam, who lost his job as a real estate salesperson when the housing market went soft.
D) Cynthia, who has few skills and is no longer looking for work.
15) Cyclical unemployment occurs when
A) individuals enter the labor market and make the rounds of potential employers.
B) individuals with skills no longer valued in the domestic labor market cannot find
employment.
C) individuals give up the search for employment.
D) a downturn in economic activity decreases employment.
16) An example of a cyclically unemployed individual is
A) Charles, who lost his job as a real estate salesperson when the housing market went soft.
B) Alice, who quit her job to enter college.
C) Mary, who lost her job in the textile industry following a decrease in the tariff on textiles.
D) Bob, who has just graduated from college and is entering the labor market.
17) If an outdoor vendor loses her job when winter weather comes, this individual is
A) seasonally unemployed. B) cyclically unemployed.
C) structurally unemployed. D) chronically unemployed.
18) Structural unemployment results when
A) a reduction in consumer income reduces demand for products.
B) individuals enter the labor market in June following graduation.
C) workers face layoffs following a decrease in economic activity.
D) the introduction of a product substitute leads to a large decline in the market demand for a
product so that workers specializing in the production of that product find themselves out
of work.
19) Which of the following explains why frictional unemployment exists?
A) Some workers have skills that have become obsolete.
B) There are individuals who work part time but prefer to work full time.
C) There are costs associated with searching for jobs .
D) Policy makers have been unable to prevent recessions.
20) Unemployment that is caused by business recessions is called
A) frictional unemployment. B) cyclical unemployment.
C) seasonal unemployment. D) structural unemployment.
21) A person quits her job in order to spend time looking for a better paying job. This is an example
of
A) frictional unemployment. B) cyclical unemployment.
C) seasonal unemployment. D) structural unemployment.
22) Environmental regulation reduces the demand for West Virginia coal and the unemployment
rate in West Virginia increases. This is an example of
A) frictional unemployment. B) cyclical unemployment.
C) structural unemployment. D) regulatory unemployment.
23) Unemployment due to the fact that workers have difficulty in the search for appropriate job
offers is
A) frictional unemployment. B) structural unemployment.
C) cyclical unemployment. D) seasonal unemployment.
24) Unemployment that results from a mismatch of workers abilities and skills with current
requirements of employers is
A) frictional unemployment. B) structural unemployment.
C) cyclical unemployment. D) seasonal unemployment.
25) Unemployment that results from business recessions that occur when aggregate demand is
insufficient to create full employment is
A) frictional unemployment. B) structural unemployment.
C) cyclical unemployment. D) seasonal unemployment.
26) Unemployment that results from the seasonal pattern of work in specific industries is
A) frictional unemployment. B) structural unemployment.
C) cyclical unemployment. D) seasonal unemployment.
27) Frictional unemployment always exists because
A) some workers quit their jobs without having another job already lined up.
B) the government has never instituted full employment policies.
C) workers are lazy and refuse to accept certain jobs.
D) recessions are necessary sometimes to keep the economy healthy.
28) Frictional unemployment is
A) related to job search difficulties for potential workers.
B) a result of a poor match of worker s abilities and skills with current requirements of
employers.
C) a result of business recessions that occur when aggregate demand is insufficient to create
full employment.
D) a result of the seasonal pattern of work in specific industries.
29) A worker who has quit her job to obtain a higher paying job would be included in which
unemployment category?
A) Frictional unemployment B) Cyclical unemployment
C) Structural unemployment D) Seasonal unemployment
30) To prevent frictional unemployment, we would have to
A) make sure that market demand for goods is stable over time.
B) eliminate the business cycle.
C) prevent people from leaving their jobs before finding another job.
D) make sure everyone went to college.
31) Structural unemployment is
A) due to the fact that workers must search for appropriate job offers.
B) a result of a poor match of worker s abilities and skills with current requirements of
employers.
C) a result of business recessions that occur when aggregate demand is insufficient to create
full employment.
D) a result of the seasonal pattern of work in specific industries.
32) Cyclical unemployment is
A) related to job search difficulties for potential workers.
B) a result of a poor match of worker s abilities and skills with current requirements of
employers.
C) a result of business recessions that occur when aggregate demand is insufficient to create
full employment.
D) a result of the seasonal pattern of work in specific industries.
33) Cyclical unemployment is caused by
A) technological change.
B) fluctuations in the business cycle.
C) a dynamic economy in which people want to switch jobs sometimes.
D) predictable shifts in production associated with different seasons.
34) Seasonal unemployment is
A) due to the fact that workers must search for appropriate job offers.
B) a result of a poor match of worker s abilities and skills with current requirements of
employers.
C) a result of business recessions that occur when aggregate demand is insufficient to create
full employment.
D) a result of the seasonal pattern of work in specific industries.
35) The seasonally adjusted unemployment rate
A) reports only seasonal unemployment.
B) removes the seasonal variation from the unemployment rate.
C) is impossible to compute since no one knows what the seasonal component equals.
D) is another name for structural unemployment.