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Chapter 7
The Macroeconomy: Unemployment, Inflation, and Deflation
7.1 Unemployment
1) Which of the following is true of unemployment?
A) It is defined as the number of people actively looking for work who do not have jobs.
B) The result is that the economy operates inside its production possibilities curve.
C) There are psychological consequences associated with unemployment.
D) All of the above.
2) Which of the following is true about the labor force?
A) It includes those over 16 who are employed.
B) It includes those over 16 who are unemployed.
C) Both A and B are correct.
D) None of the above is correct.
3) A country slabor force is equal to
A) the population between the ages of 16 and 65.
B) the number of employed people.
C) the total number of employed and unemployed people.
D) the total number of employed people, unemployed people, and discouraged workers.
4) Which of the following people would be considered unemployed?
A) Homer, who lost his job at the power plant and is not looking for work
B) Lenny, who is working part time at a fast food restaurant
C) Abe, who is retired
D) Edna, who lost her job as a teacher and is currently searching for a new job
5) The term unemployment is best described as the total number of
A) people not working.
B) people who have been laid off and have stopped looking for work.
C) adults who work fewer hours than they wish to work.
D) adults who are looking for work but have not found a job.
6) According to the text, during which time period did the United States have the highest
unemployment rates?
A) 1930s B) 1950s C) 1980s D) 2000s
7) Individuals who have stopped looking for work because they are convinced that they will not
find a job are considered
A) structurally unemployed. B) discouraged workers.
C) part of the labor force. D) underemployed.
8) Which federal agency publishes the United States unemployment figures?
A) Health and Human Services
B) The Bureau of Labor Statistics
C) The Federal Reserve
D) The Senate Committee on Labor Relations
9) Over the last 125 years in the United States, unemployment reached its highest rate
A) in the Panic of 1893.
B) in the 1930s.
C) in the period between World War II and the Korean War.
D) in the Great Recession of the late 2000s.
10) When did the United States register its lowest unemployment rate?
A) In the 1920s B) In the economic boom of the 1990s
C) In the Roaring Nineties (1890s) D) At the end of World War II
11) The population of individuals at least 16 years of age can be broken into 3 groups. They are
A) the unemployed, discouraged workers, and retirees.
B) those employed full time, those employed only part time, and the unemployed.
C) those working in the for profit sector, those working in the nonprofit sector, and
individuals who are unemployed.
D) none of the above.
12) The rate of unemployment is calculated as the number of
A) unemployed workers divided by the number of employed workers.
B) people in the civilian labor force divided by the number of unemployed.
C) unemployed divided by the number of people in the civilian labor force.
D) employed workers divided by the number of unemployed workers.
13) According to the Bureau of Labor Statistics, if you voluntarily leave your job to search for
another job, then you
A) are classified as unemployed.
B) are eligible for unemployment compensation.
C) may not re enter the labor force for six months.
D) are classified as a job loser.
14) Official unemployment rates may underestimate the true rate of unemployment because the
official rate
A) includes those workers who only work part time.
B) may include some individuals who are not actually in the labor force.
C) does not include individuals receiving any type of unemployment compensation.
D) fails to include discouraged workers.
15) The official unemployment rate may understate the true rate of unemployment because of
A) workers who hold two jobs.
B) increases in worker productivity.
C) changes in wage rates.
D) discouraged workers who no longer are actively seeking work and are excluded from the
statistics.
16) Historically, the United States has experienced
A) continuous decreases in the unemployment rate since World War II.
B) periods of both increases and decreases in the unemployment rate since World War II.
C) continuous increases in the unemployment rate since World War II.
D) no changes in the unemployment rate since World War II.
17) When Joe, who is among the highest paid workers in a field in which there are numerous job
openings across the nation, recently became unemployed, his opportunity cost of job search is
A) average, so the length of his period of unemployment is likely to be long.
B) relatively high, so the length of his period of unemployment is likely to be short.
C) relatively low, so the length of his period of unemployment is likely to be long.
D) relatively high, so the length of his period of unemployment is likely to be long.
18) If the U.S. economy enters a recession, the
A) economy experiences full employment.
B) unemployment rate tends to increase.
C) labor force tends to increase.
D) entire population will be partially unemployed.
19) The total civilian labor force is comprised of
A) the unemployed and the employed.
B) only the employed.
C) all individuals over 16 years of age, whether or not they work or are seeking work.
D) only full time employed individuals between the ages of 18 and 55.
20) The labor force includes individuals who are:
I. Employed
II. Unemployed
III. Discouraged workers
A) I only. B) Both I and II. C) Both I and III. D) All I, II and III.
21) Which of the following best fits the definition of unemployed?
A) Retired and not working
B) Working less than a full work week
C) Not working but looking for a job
D) Not working at a gainful pursuit, either in or out of the home
22) By definition, the labor force participation rate is
A) the percentage of institutionalized working age individuals who are employed or seeking
employment.
B) the percentage of noninstitutionalized working age individuals who are employed or
seeking employment.
C) the annual rate of growth in the number of people who are either employed or searching
for available jobs.
D) the annual rate of growth in the number of people who are unemployed and searching for
available government provided unemployment benefits.
23) The rate of unemployment is found by
A) dividing the number unemployed by the number of people in the labor force.
B) dividing the number unemployed by the number employed.
C) dividing the number employed by the number of people in the labor force.
D) dividing the number employed by the number unemployed.
24) Including discouraged workers in the calculation of the unemployment rate would
A) increase the reported rate.
B) lower the reported rate.
C) not change the reported rate.
D) change the reported rate, but in an unpredictable manner.
25) Unemployment is measured as
A) all teens and adults in the civilian labor force who are not working.
B) all adults in the civilian labor force who are willing and able to work and who are actively
looking for work, but have not found a job.
C) all adults in the civilian labor force, regardless of whether or not they have been engaged
in actively seeking employment, who do not have the job they want.
D) all adults in the civilian labor force who are not working.
26) The labor force is defined as the number of
A) employed plus the number of unemployed.
B) people who are working.
C) people who are working in labor type jobs.
D) union members who are working.
27) The U.S. Department of Labor classifies all individuals in the United States as
A) labor force participants.
B) either employed, unemployed, or not in the labor force.
C) either overemployed or underemployed.
D) potential employees.
28) A person who previously had a full time job has been paroled from prison and has applied for
a job is considered
A) a reentrant. B) a job loser.
C) a new entrant. D) not in the labor force.
29) Increases in the duration of unemployment may
A) reflect a general downturn in economic activity that depresses job openings.
B) increase the number of discouraged workers.
C) increase the unemployment rate.
D) all of the above.
30) Which category of unemployed individuals makes up the greatest share of those who are
unemployed?
A) New entrants B) Reentrants C)
J
ob losers D)
J
ob leavers
31) Which of the following is a stock variable? The number of
A) unemployed people. B) reentrants.
C)
j
ob losers. D)
j
ob leavers.
32) The number of people that are fired in a month is
A) a stock. B) a flow.
C)
b
oth a stock and a flow. D) neither a stock nor a flow.
33) When there is an increase in the duration of unemployment, the U.S. Congress typically
responds by
A) lowering income taxes.
B) extending unemployment benefits.
C) encouraging unemployed U.S. workers to seek employment overseas.
D) redefining unemployed so the unemployment rate does not look so bad.
34) The labor force participation rate shows the percentage of
A) people not working, but who want to work.
B) people who are not actively participating in meaningful economic activity.
C) new entrants into the labor force.
D) non institutionalized working age people who are actually working or seeking
employment.
35) The largest major change in the U.S. labor force participation rate during the last few decades
has been
A) the number of prisoners dropping out of the labor force.
B) the increase in the number of working women.
C) the decrease in the number of working women.
D) the increase in the number of illegal immigrants in the United States.
36) In the United States, the labor force participation rate since 1960 has been
A) increasing for females. B) declining for females.
C) declining for both males and females. D) unchanged for both males and females.
37) If a person is laid off from a job, he is considered by the Bureau of Labor Statistics to be a
A)
j
ob loser. B) reentrant. C)
j
ob leaver. D) new entrant.
38) If I voluntarily end my employment, the Bureau of Labor Statistics would consider me to be
A) a job loser. B) a job leaver.
C) a discouraged worker. D) a reentrant.
39) Which of the following would NOT be considered unemployed?
A) A new entrant to the labor force
B) A job leaver who is looking for a better job
C) An individual fired by her employer
D) A newly retired worker
40) The largest category of the unemployed are
A)
j
ob losers. B) reentrants. C)
j
ob leavers. D) new entrants.
41) Which of the following can cause official unemployment figures to underestimate the true
unemployment rate?
A) Some people get discouraged and quit looking for a job.
B) Some people engage in illegal activities.
C) Some people work off the books.
D) Some people work overtime.
42) The unemployment rate will rise when
A) people get discouraged and quit looking for a job.
B) the average work week falls from 40 hours to 39 hours.
C) the duration of unemployment increases.
D) the size of the labor force increases without an increase in employment.
43) In recent years the labor force participation rate has been fairly stable,
A) as has the labor force participation rate for males, females, minorities, and nonminorities.
B) although the female labor force participation rate has fallen while the male labor force
participation rate has increased.
C) although the male labor force participation rate has fallen while the female labor force
participation rate has increased.
D) although the labor force participation rate of young adults has increased while the labor
force participation rate of those in the 40 55 age classification has fallen.
44) If the duration of unemployment in a country increases from 16 weeks to 18 weeks, then
A) the unemployment rate will decrease. B) the unemployment rate will increase.
C) the size of the labor force will increase. D) the size of the labor force will decrease.
45) The duration of unemployment tends to
A) increase when business activity decreases.
B) increase when employment increases.
C) increase when the labor force shrinks.
D) stay consistently the same over long periods of time.
46) People who have dropped out of the labor force and who are no longer looking for a job because
they believe the job market has little to offer them are classified by the Labor Department as
A) unemployed. B) non participants.
C) discouraged workers. D) wage rate busters.
47) Which of the following people would be considered unemployed by the Bureau of Labor
Statistics?
I. Mrs. X retires from her job and does not look for another job.
II. Mr. Y was laid off from his job as a welder, but expects to be rehired in 8 months.
A) I only B) II only C) Both I and II D) Neither I nor II
48) To be officially counted as unemployed, a person must be
A) at least 16 years old.
B) at least 18 years old.
C) at least 21 years old.
D) any age, so long as you are looking for work.
49) Who is considered officially unemployed?
A) Six months after failing to get a job, Abba quit looking.
B) Monica graduated from college last summer but is still unemployed despite her spirited
search.
C) Kariuki is a retired teacher.
D) Chen is going to school full time.
50) Costs of unemployment include
A) structural unemployment.
B) the output lost due to the fact that the economy is not running at full employment.
C) reduction in the labor force.
D) higher wages.
51)
J
asime voluntarily quit her job and is now searching for a new position. Jasime is classified as a
A)
j
ob loser. B)
j
ob reentrant. C)
j
ob leaver. D) new entrant.
52) If there is unemployment and all businesses are operating at less than full capacity, then
A) there are too many workers, and some people ought to leave the labor force.
B) we are not experiencing a net social cost to unemployment because it is offset by the
capacity levels of the factories.
C) society is producing inside its production possibilities curve.
D) society is at the wrong point on the production possibilities curve.
53) The labor force participation rate includes
A) only those who are employed.
B) only those employed but looking for a job.
C)
b
oth employed workers and discouraged workers not seeking jobs.
D)
b
oth employed workers and those unemployed but seeking employment.
54) One major reason that economists are concerned about unemployment is that
A) unemployment always leads to frictional unemployment.
B) unemployment reduces the size of the labor force.
C) unemployment shifts the production possibilities curve outward.
D) the economy is producing less output than if there were full employment.
55) Which of the following individuals is NOT counted as unemployed?
A)
J
amil, who recently quit his job and is looking for a new position
B)
J
ackie, who was recently fired and is now applying for another job
C)
J
ack, who has become discouraged about ever finding a job and has stopped looking
D)
J
ennifer, who just graduated from college and is now seeking employment with the
company of her dreams.
56) To be considered officially unemployed, a person must be at least 16 years old
A) and not working.
B) and not in school and not working.
C) and be a discouraged worker.
D) and not working but is actively seeking employment.
57) Over the last 100 years in the United States, unemployment reached its highest rate
A) in the 1920s. B) in the 1930s. C) in the 1970s. D) in the 1980s.
58) The population is 1,200 million, the labor force is 150 million, and the number of unemployed is
15 million. What is the unemployment rate?
A) 7.5 percent B) 4.3 percent C) 10 percent D) 5 percent
59) To be officially classified as unemployed, a person must be
A) collecting unemployment benefits.
B) at least 18 and not working.
C) at least 16, not working and actively seeking employment.
D) laid off or fired.
60) The labor force is defined as
A) all individuals who are currently employed.
B) all individuals who are at least 16 years old and are currently employed.
C) all individuals who are at least 16 years old and are currently employed or unemployed.
D) all individuals who are at least 16 years old and are employed, looking for work or not
looking for work.
61) The labor force includes all of the following individuals who are 16 years or older EXCEPT
A) people who have never been in the labor force but have just found a job.
B) the employed.
C) the unemployed.
D) people who are retired and not actively seeking work.
62) The definition of the adult population is those who are 16 years and older and who are
A) employed or unemployed.
B) in the labor force.
C) in the labor force or not in the labor force.
D) not in the labor force.
63) A person who has taken medical leave is
A) in the labor force. B) not in the labor force.
C) unemployed. D) a job leaver.
64) By the legal definition of unemployment, a person who has quit his job to take care of his
children full time is
A) unemployed. B) employed.
C) in the labor force. D) not in the labor force.
65) The labor force is defined as
A) the number of people over 16 years of age.
B) the number of people who are working.
C) the sum of the employed and the unemployed.
D) the number of people in blue collar jobs.
66) Unemployment is a ________ concept, measuring the ________.
A) flow; number of people who are first entering the labor force.
B) flow; number of people who lost their jobs within the last week.
C) stock; number of people who are not working.
D) stock; number of people at a point in time who are not working but who are looking for
work.
67) Unemployment is a
A) flow concept. B) stock concept.
C)
b
oth a flow and a stock concept. D) neither a stock nor a flow concept.
68) Suppose that last week 100,000 people lost their jobs or quit. We can say that
A) the number of unemployed increased by 100,000 people.
B) the number of unemployed increased by less than 100,000 people because we should not
count those who quit their jobs.
C) the 100,000 people represent a flow known as job departures.
D) the 100,000 people represent a stock known as the new unemployed.
69) Last month 100 million people were in the labor force with 6 million being unemployed. 200,000
people lost their jobs last month and 300,000 found jobs. Distinguishing between stock measures
and flow measures, the stock measures are
A) the labor force only.
B) the number of people who lost their jobs and the number of people who found jobs only.
C) the total number of people who are unemployed only.
D) the total number in the labor force and the total number of people who are unemployed
only.
70) Last month 100 million people were in the labor force with 6 million being unemployed. 200,000
people lost their jobs last month and 300,000 found jobs. Distinguishing between stock measures
and flow measures, the flow measures are
A) the labor force only.
B) the number of people who lost their jobs and the number of people who found jobs only.
C) the total number of people who are unemployed only.
D) the total number in the labor force and the total number of people who are unemployed
only.
71) Suppose there are 100 million in the labor force, and 6 million unemployed people. During the
next month, 200,000 people lose their jobs and 300,000 find jobs. The new total of employed is
________ and the new unemployment rate is ________.
A) 100.1 million; 5.8 percent. B) 100 million; 6.1 percent.
C) 94.1 million; 5.9 percent. D) 93.9 million; 6.1 percent.
72) Suppose the population of Millerville is 100,000. Of the population 16 years and older, 50,000
are employed, 10,000 have never worked and are not looking for work, 5,000 are not working
and are looking for work, and 15,000 are retired and not looking for work. The labor force
equals
A) 50,000. B) 55,000. C) 65,000. D) 80,000.
73) Suppose the population of Millerville is 100,000. Of the population 16 years and older, 50,000
are employed, 10,000 have never worked and are not looking for work, 5,000 are not working
and are looking for work, and 15,000 are retired and not looking for work. The number
unemployed equals
A) 5,000. B) 10,000. C) 15,000. D) 20,000.
74) In a small country, the population equals 5,000. There are 4,000 people in the labor force and
3,000 people are employed. The unemployment rate equals
A) 0.25
B) 0.6
C) 0.75
D) an undetermined amount given the lack of information.
75) In a small country, the adult population is 10,000. In that country, 7,000 people are in the labor
force and 6,300 people are employed. The unemployment rate equals
A) 0.63 percent.
B) 7 percent.
C) 10 percent.
D) an undetermined amount given the lack of information.
76) In a small country, the adult population equals 10,000. In that country, 8,000 people are in the
labor force and 200 people are unemployed. The unemployment rate equals
A) 2.5 percent.
B) 2 percent.
C) 4 percent.
D) an undetermined amount given the lack of information.
77) A job loser is an individual
A) in the labor force whose employment was involuntarily terminated.
B) who used to work full time but left the labor force and has now reentered it looking for a
job.
C) in the labor force who quits voluntarily.
D) who has never held a full time job lasting two weeks or longer but is now seeking
employment.
78) A reentrant is an individual
A) in the labor force whose employment was involuntarily terminated.
B) who used to work full time but left the labor force and has now reentered it looking for a
job.
C) in the labor force who quits voluntarily.
D) who has never held a full time job lasting two weeks or longer but is now seeking
employment.
79) A job leaver is an individual
A) in the labor force whose employment was involuntarily terminated.
B) who used to work full time but left the labor force and has now reentered it looking for a
job.
C) in the labor force who quits voluntarily.
D) who has never held a full time job lasting two weeks or longer but is now seeking
employment.
80) An individual in the labor force whose employment was involuntarily terminated is
A) a job leaver. B) a job loser. C) a job reentrant. D) part of the PPI.
81) All of the following are considered to be unemployed EXCEPT
A)
j
ob leavers. B) discouraged workers.
C)
j
ob reentrants. D) new job entrants.
82) New entrants to the labor force usually account for around ________ percent of the
unemployed.
A) ten B) twenty C) twenty five D) thirty
83) A new entrant is an individual
A) in the labor force whose employment was involuntarily terminated.
B) who used to work full time but left the labor force and has now reentered it looking for a
job.
C) in the labor force who quits voluntarily.
D) who has never held a full time job lasting two weeks or longer but is now seeking
employment.
84) The unemployment rate can increase when
A) the number of job finders increases.
B) the size of the military increases.
C) the proportion of 18 22 year olds that go to college increases.
D) the number of unemployed workers increases.
85) The duration of unemployment tends to rise when
A) people leave their jobs rather than lose their jobs.
B) the number of entrants exceeds the number of reentrants.
C)
b
usiness activity starts back up after a long period of decline.
D)
b
usiness activity goes into a downturn.
86) Discouraged workers
A) are considered part of the unemployed because they are not working.
B) are considered part of the unemployed because they are still in the labor force.
C) are not considered part of the unemployed because they quit their jobs voluntarily.
D) are not considered part of the unemployed because they are not actively seeking work.
