Chapter 7 - Unemployment

Question 1

After GDP, what is considered the second most important indicator of economic health?

Answer 1

The unemployment rate

Question 2

Does the unemployment rate include people who aren’t looking for a job?

Answer 2

No

Question 3

What occurs when a worker who is not currently employed is searching for a job without success?

Answer 3

Unemployment

Question 4

What do we use to monitor the level of unemployment in an economy?

Answer 4

Unemployment rate

Question 5

What is the percentage of the labor force that is unemployed?

Answer 5

Unemployment rate (u)

Question 6

What are the three types of unemployment?

Answer 6

1. Structural
2. Frictional
3. Cyclical

Question 7

Why are structural unemployment and frictional unemployment called “natural unemployment?”

Answer 7

They occur when the economy is healthy and growing

Question 8

Is it practical to have zero unemployment?

Answer 8

No

Question 9

Which unemployment is caused by changes in the industrial makeup of the economy?

Answer 9

Structural unemployment

Question 10

Who came up with the term “creative destruction?”

Answer 10

Joseph Schumpeter

Question 11

What is the term used to describe the process of economic evolution?

Answer 11

Creative destruction

Question 12

What occurs when the introduction of new products and technologies leads to the end of other industries and jobs?

Answer 12

Creative destruction

Question 13

What does the creative destruction process lead to?

Answer 13

Structural unemployment

Question 14

In a dynamic economy is job turnover normal?

Answer 14

Yes

Question 15

How can structural unemployment be reduced?

Answer 15

Workers must often retrain, relocate, or change their expectations in some way

Question 16

What is caused by delays in matching available jobs and workers?

Answer 16

Frictional unemployment

Question 17

What two types of unemployment cause natural unemployment?

Answer 17

1. Structural

2. Frictional

Question 18

What are two causes of change in frictional unemployment?

Answer 18

1. Information availability

2. Government policies

Question 19

What is a government program that reduces the hardship of joblessness by guaranteeing that unemployed workers receive a percentage of their former income while they are unemployed?

Answer 19

Unemployment insurance

Question 20

What is the RealGDP of the base year?

Answer 20

The NominalGDP

Question 21

What is cyclical unemployment caused by?

Answer 21

Recessions

Question 22

Which unemployment is caused by the ups and downs of the economy?

Answer 22

Cyclical unemployment

Question 23

What is the root cause of cyclical unemployment?

Answer 23

An unhealthy economy

Question 24

During a healthy economy is cyclical unemployment present?

Answer 24

No

Question 25

What is the typical rate of unemployment in an healthy economy?

Answer 25

Natural rate of unemployment (u*)

Question 26

What is the output level produced in an economy when there is no cyclical unemployment?

Answer 26

Full employment output (Y*)

Question 27

When cyclical unemployment is 0 does that mean our economy is healthy, we are having a recession, or we are having an expansion?

Answer 27

Our economy is healthy

Question 28

When cyclical unemployment is positive does that mean our economy is healthy, we are having a recession, or we are having an expansion?

Answer 28

We are having a recession

Question 29

When cyclical unemployment is negative does that mean our economy is healthy, we are having a recession, or we are having an expansion?

Answer 29

We are having an expansion

Question 30

In each of the following situations, is the unemployment that occurs a result of cyclical, frictional, or structural changes? a. Workers in a high-end restaurant are laid off when the establishment experiences a decline in demand during a recession. b. A group of automobile workers lose their jobs as a result of a permanent reduction in the demand for automobiles. c. A new college graduate takes three months to find his first job.

Answer 30

1. Cyclical 2. Structural 3. Frictional

Question 31

How do we measure the unemployment rate?

Answer 31

(# unemployed/ labor force) x 100

Question 32

How do we calculate to labor force?

Answer 32

You take the # of employed + the # of unemployed

Question 33

Is the military apart of the labor force?

Answer 33

No

Question 34

Who are people who want a job but get discouraged and give up looking for work?

Answer 34

Discouraged workers

Question 35

Are discouraged workers included in the labor force?

Answer 35

No

Question 36

Who are part-time workers who want a full-time job?

Answer 36

Underemployed workers

Question 37

How do we collect the unemployment data?

Answer 37

Through the household survey

Question 38

What is the portion of the population that is in the labor force called?

Answer 38

The labor force participation rate

Question 39

How do you find the labor force participation rate?

Answer 39

(Lab. for./pop.) x 100

Question 40

The following data is from Germany in 2010: Working-age population = 70,856,000 Labor force = 41,189,000 Employed = 38,209,000 Question: Using the data, how would you compute the number of unemployed workers, the unemployment rate, and the labor force participation rate for Germany in 2010?

Answer 40

1. 2,980,000 2. 7.2 3. 58.1%