Macroeconomics 2017 (Hubbard)
Chapter 9 Unemployment and Inflation
9.1 Measuring the Unemployment Rate, the Labor Force Participation Rate, and the
Employment-Population Ratio
1) Due to low interest rates, increased banking regulations, and technological change, JPMorgan Chase
announced it would ________ the number of persons it employed in 2015 and this would ________ the
total number of persons unemployed in the economy.
A) decrease; increase
B) decrease; decrease
C) increase; decrease
D) increase; increase
2) The economy has gone into a recession. You have majored in computer science and, because of the
recession, have difficulty in finding a job. Should you go back to school and get a second major?
A) Yes, the recession will ensure that you will never find a job as a programmer.
B) Yes, the recession will lower income in my field permanently.
C) No, the recession will most likely be short-lived and I can get a job after it is over.
D) No, the recession will have no impact on my ability to get a job or my future income.
3) The unemployment rate is an important economic statistic that can tell us about the health of the
economy. If the unemployment rate turns out to be high or higher than anticipated, we would expect
A) it is more likely that an incumbent president will be re-elected.
B) that stock prices are more likely to fall.
C) that jobs are less difficult to find.
D) that investors will be more optimistic about the economy.
4) The Bureau of Labor Statistics would categorize a person as ________ if they were temporarily away
from their job because they were ill.
A) employed
B) unemployed
C) a discouraged worker
D) out of the labor force
5) The Bureau of Labor Statistics would categorize a retiree who is not working as
A) employed.
B) unemployed.
C) a discouraged worker.
D) out of the labor force.
6) The labor force equals the number of people
A) employed.
B) unemployed.
C) employed plus unemployed.
D) in the working-age population.
7) Suppose that homemakers are included as employed in the labor force statistics, rather than being
counted as out of the labor force. This would
A) increase the measured unemployment rate.
B) increase the measured labor force participation rate.
C) decrease the number of persons in the labor force.
D) decrease the number of persons in the working-age population.
Table 9-1
Total population
20,000
Working-age population
15,000
Employment
1,000
Unemployment
100
Consider the data above for a simple economy.
8) Refer to Table 9-1. The unemployment rate for this simple economy equals
A) (100/1,000) × 100.
B) (100/1,100) × 100.
C) (100/15,000) × 100.
D) (100/20,000) × 100.
9) Refer to Table 9-1. The labor force participation rate for this simple economy equals
A) (1,000/1,100) × 100.
B) (1,000/15,000) × 100.
C) (1,100/15,000) × 100.
D) (1,100/20,000) × 100.
10) Suppose the working-age population of a fictional economy falls into the following categories: 90
are retired or homemakers; 60 have full-time employment; 20 have part-time employment; 20 do not
have employment, but are actively looking for employment; and 10 would like employment but do not
have employment and are not actively looking for employment. The official unemployment rate as
calculated by the U.S. Bureau of Labor would equal
A) (20/60) × 100.
B) (20/80) × 100.
C) (30/80) × 100.
D) (20/100) × 100.
11) Suppose the labor force stays constant, and the working-age population stays constant, but a greater
number of persons who were unemployed become employed. The labor force participation rate will
A) increase.
B) decrease.
C) remain constant.
D) not change in a way that can be predicted.
12) The unemployment rate equals the number of unemployed divided by the ________, all times 100.
A) number of employed
B) labor force
C) working-age population
D) total population
13) Suppose the government launches a successful advertising campaign that convinces workers with
high school degrees to quit their jobs and become full time college students. This would cause
A) the unemployment rate to decrease.
B) the labor force participation rate to decrease.
C) the number of discouraged workers to increase.
D) no change in the unemployment rate.
14) Someone who is available for work but has not actively looked for work in the previous four weeks
would be classified as
A) employed.
B) unemployed.
C) not in the labor force.
D) not in the working-age population.
15) The labor force participation rate equals the
A) (number of employed divided by the labor force) × 100.
B) (labor force divided by the number of people not in the labor force) × 100.
C) (labor force divided by working-age population) × 100.
D) (labor force divided by the total population) × 100.
16) If the BLS counted persons that are on active military service in the totals for employment, the labor
force, or the working-age population, this would
A) decrease the measured unemployment rate.
B) decrease the measured labor force participation rate.
C) decrease the number of persons in the labor force.
D) decrease the number of persons in the working-age population.
17) Which of the following labor market statistics best indicates the amount of labor that is available to
the economy from a given working-age population?
A) unemployment rate
B) discouraged-worker ratio
C) labor force participation rate
D) the ratio of minimum wage to inflation
18) Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics
to understate the true extent of joblessness?
A) inflation
B) discouraged workers
C) people employed in the underground economy
D) unemployed persons falsely report themselves to be actively looking for a job
19) Which of the following cause the unemployment rate as measured by the Bureau of Labor Statistics
to overstate the true extent of joblessness?
A) inflation
B) discouraged workers
C) counting people as employed who are working part time, although they would prefer to be working
full time
D) unemployed persons falsely report themselves to be actively looking for a job
20) Which of the following explains the changes in the U.S. adult male labor force participation rate
since 1948?
A) More men are joining the military as compared to the past.
B) More men are retiring later in life as compared to the past.
C) Fewer men consider themselves discouraged workers as compared to the past.
D) Younger men are remaining in school longer as compared to the past.
21) In 2006, before the start of the recession, the employment—population ratio was 63.4 percent. In
August 2015, more than six years after the end of the recession, the ratio
A) was still 50 percent lower than the ratio in 2006.
B) was still only 59.4 percent.
C) was back to its 2006 level.
D) had increased to 72.3 percent.
22) If the employment-population ratio in 2015 was at the same level as it was in 2006,
A) the same number of people would have been working in 2015 as were working in 2006.
B) 3.5 million fewer people would have been working in 2015 than actually were.
C) an additional 8 million people would have been working in 2015 than actually were.
D) the number of employed people in 2015 would not have been different.
23) Since 1948, the labor force participation rate for adult men has ________ and for adult women has
________.
A) increased; increased
B) increased; decreased
C) decreased; increased
D) decreased; decreased
24) Using a broader measure of the unemployment rate where discouraged workers and part-time
workers who wished to work full time were counted as unemployed, the BLS estimates the
unemployment rate in August 2015 would have ________ compared to the measured unemployment
rate.
A) increased by more than 7 percentage points
B) more than doubled
C) decreased by less than 1 percentage point
D) barely changed
25) In the modern U.S. economy, the typical unemployed person stays unemployed for
A) a relatively long time, over a year.
B) a relatively short time, less than six months.
C) a long time during expansions and a short time during recessions.
D) an amount of time that is hard to quantify.
26) An advantage of the establishment survey over the household survey of the labor market is that the
establishment survey
A) is based on actual payrolls, rather than on unverified answers.
B) includes the number of self-employed persons.
C) includes persons employed at newly opened firms.
D) provides an estimate of the number of persons unemployed.
27) An advantage of the household survey over the establishment survey of the labor market is that the
household survey
A) is based on actual payrolls, rather than on unverified answers.
B) includes the number of self-employed persons.
C) includes the number of discouraged workers.
D) omits persons employed at newly opened firms.
28) Which of the following statements is true about the U.S. economy?
A) Each year, many new jobs are created, but few existing jobs are destroyed, and the unemployed find
jobs quickly.
B) Each year, few new jobs are created, but few existing jobs are destroyed, keeping unemployment low.
C) Each year, many new jobs are created and many existing jobs are destroyed.
D) Each year few jobs are created, and therefore it takes the unemployed a long time to find a new job.
29) The labor force is the sum of
A) employed workers and discouraged workers.
B) employed workers and unemployed workers.
C) employed workers and individuals not looking for work.
D) unemployed workers and the working-age population.
30) Upon your graduation from college, you find that the economy is in recession and the
unemployment rate is relatively high. Nonetheless, you continue along your career path looking for a
new job because
A) the cost of additional education is always higher during recession.
B) high unemployment rates do not usually last for very long.
C) looking for work is your only option.
D) the wages of college graduates do not fall during recession.
31) The unemployment rate is
A) the percentage of the labor force that is employed.
B) the percentage of the number employed that is unemployed.
C) the percentage of the working-age population that is unemployed.
D) the percentage of the labor force that is unemployed.
E) the percentage of the working-age population that is employed.
32) A full-time student who is not working is categorized as
A) unemployed.
B) employed.
C) not in the labor force.
D) a discouraged worker.
E) frictionally unemployed.
33) Discouraged workers are classified by the BLS as
A) part of the labor force.
B) out of the labor force.
C) unemployed.
D) employed.
E) part-time employees.
34) Discouraged workers are
A) workers who have a part time job but want a full time job.
B) workers who find their current jobs unfulfilling and are considering a job change.
C) workers who have consistently been looking for work for more than 4 weeks.
D) workers who have stopped looking for work because they believe there are no jobs for them.
35) The labor force participation rate is defined as
A) the percentage of the working-age population that is employed.
B) the percentage of the working-age population that is unemployed.
C) the percentage of the labor force that is employed.
D) the percentage of the labor force that is unemployed.
E) the percentage of the working-age population in the labor force.
36) Mike has been unemployed for over a year. He hasn’t looked for a job in the last three months, but
he’s just started looking for work again. Because Mike started looking for a new job,
A) the unemployment rate increased.
B) the labor force participation rate decreased.
C) the unemployment rate decreased.
D) the working-age population increased.
37) During the month of May, 10 million workers moved from being classified as “unemployed” to
being classified as “employed.” As a result,
A) the unemployment rate rose.
B) the labor force participation rate fell.
C) the unemployment rate fell.
D) the labor force participation rate rose.
38) Which of the following would reduce the labor force participation rate, all else equal?
A) an increase in the number of people in the labor force
B) an increase in the unemployment rate
C) a decrease in the unemployment rate
D) an increase in the working-age population
39) Jack lost his job six months ago, and he’s been actively looking for a new job ever since. The Bureau
of Labor Statistics would classify Jack as
A) unemployed.
B) out of the labor force.
C) a discouraged worker.
D) all of the above.
40) Which of the following causes the unemployment rate to understate the true extent of joblessness?
A) Many full time workers really want to be part time workers.
B) Persons who collect unemployment benefits report themselves to be searching for a job.
C) Discouraged workers are not counted as unemployed.
D) A drug dealer reports herself as unemployed.
E) Discouraged workers are counted as unemployed.
41) In August 2015, the U.S. unemployment rate was highest for
A) whites.
B) Hispanics.
C) high school dropouts.
D) African Americans.
E) Asians.
42) If the number employed is 190 million, the working-age population is 230 million, and the number
unemployed is 10 million, then the unemployment rate is
A) 5%.
B) 5.2%.
C) 8%.
D) 10%.
E) 50%.
43) If the number employed is 190 million, the number unemployed is 10 million, and the working-age
population is 250 million, then the labor force participation rate is
A) 4%.
B) 5.2%.
C) 60%.
D) 76%.
E) 80%.
44) Except for recessions, the duration of unemployment for the typical person lasts
A) less than six months.
B) six to nine months.
C) over nine months.
D) over one year.
E) over five years.
45) If the number of unemployed workers is 200 million, and the number in the labor force is 500
million, what is the unemployment rate?
A) 0.4%
B) 4%
C) 14%
D) 40%
46) If the number of unemployed workers is 200 million, the number of employed workers is 300
million, and the working-age population is 800 million, what is the labor force participation rate?
A) 12.5%
B) 37.5%
C) 40%
D) 62.5%
47) If the number of unemployed workers is 19 million, the number in the working-age population is
500 million, and the unemployment rate is 4%, what is the labor force participation rate?
A) 4.75%
B) 7.8%
C) 95%
D) 96.2%
48) If the number of unemployed workers is 19 million, the number in the working-age population is
500 million, and the unemployment rate is 4%, how many workers are in the labor force?
A) 1 million
B) 20 million
C) 475 million
D) 481 million
49) Which of the following describes actual trends in the U.S. labor force participation rate?
A) The labor force participation rate of adult men has risen since 1950.
B) The labor force participation rate of adult women has fallen since 1950.
C) The labor force participation rate of adult men not in school, but too young to retire has risen since
1950.
D) The labor force participation rate of adult women has risen since 1950.
E) The labor force participation rate of all adults has fallen since 1950.
50) What impact would including members of the military in employment, labor force, and working-
age population statistics have on the unemployment rate and the labor force participation rate?
A) Including members of the military would increase the unemployment rate and reduce the labor force
participation rate.
B) Including members of the military would reduce the unemployment rate and increase the labor force
participation rate.
C) Including the military would increase both the unemployment rate and the labor force participation
rate.
D) Including the military would reduce both the unemployment rate and the labor force participation
rate.
51) Jack was unemployed two weeks ago but just started a new job. As a result of this increase in the
number of employed workers, which of the following occurred?
A) The labor force participation rate increased.
B) The unemployment rate increased.
C) The labor force participation rate decreased.
D) The unemployment rate decreased.
52) Jack just received a promotion at work and now works 50 hours per week instead of 35. As a result,
A) the unemployment rate increased.
B) the unemployment rate decreased.
C) the labor force participation rate increased.
D) neither the unemployment rate nor the labor force participation rate changed.
53) For the last few decades, the labor force participation rates of men have ________, and the labor
force participation rates of women have ________.
A) risen; risen
B) fallen; fallen
C) risen; fallen
D) fallen; risen
54) Counting part-time workers who are looking for full-time work as employed overstates the degree
of joblessness in the economy.
55) In the United States, the typical person who has lost his or her job finds another one in a few months
except during severe recessions.
56) The labor force participation rates of women have rapidly increased since 1948.
57) The household survey asks adults about their employment status and is used to compile the
monthly unemployment rate.
58) The household survey is compiled from firms who answer questions about the number of persons
who are employed and on the company payroll.
59) In recent years, economists have come to rely more on the establishment survey rather than the
household survey to analyze current labor market statistics.
60) The labor force participation rates of men have gradually increased since 1948.
61) The Bureau of Labor Statistics counts as employed people who work part-time, but would prefer to
work full-time. Suppose the people who had part-time jobs, but wanted full-time jobs, were counted as
unemployed. Explain how the unemployment rate and the labor force participation rate would change.
62) The Bureau of Labor Statistics does not count discouraged workers as unemployed. Suppose
discouraged workers were counted as unemployed. Explain how the unemployment rate and the labor
force participation rate would change.
Article Summary
According to the Bureau of Labor Statistics, the unemployment rate fell from May 2015 to June 2015,
and at the same time the labor force participation rate fell to its lowest level in 38 years, to 62.6
percent. The decrease in the labor force participation rate was due to a decline in the size of the
workforce. Since the recession of 2007-2009, the participation rate has been falling, due in part to an
aging population and increased retirement of the baby boomers.
Source: Andy Kiersz, “The labor force participation rate falls to a 38-year low,” businessinsider.com,
July 2, 2015.
63) Refer to the Article Summary. Explain how the declining labor force could have led to the decrease
in the unemployment rate.
64) How would the unemployment rate and the labor force participation rate change if discouraged
workers were counted as unemployed rather than counted as out of the labor force? Show using the
formula for both measurements.
65) Suppose 180,000 people are employed, 20,000 people are unemployed, the working-age population
is 250,000, and 50,000 people are out of the labor force. Calculate the unemployment rate.
19
66) Suppose 180,000 people are employed, 20,000 people are unemployed, and 50,000 people are out of
the labor force. Calculate the labor force participation rate.
67) Fill in the missing values in the table of data collected in the household survey for December, 1996.
The working-age population, employment, unemployment, and labor force are measured in thousands.
Show your work.
Working-age
population
Employment
Unemployment
Unemployment rate
5.4%
Labor force
135,113
Labor force
participation rate
67.0%
Working-age
population
Employment
127,817
Unemployment
Unemployment rate
Labor force
135,113
Labor force
participation rate
67.0%