PRINCIPLE OF MACROECONOMICS INSTRUCTOR: NGUYEN VIET HOA (0378418749)

CHAPTER 6: UNEMPLOYMENT
PART 1: MULTIPLE CHOICE QUESTIONS
1. Which list includes all the categories into which the BLS divides the adult population?
A. employed or unemployed
B. discouraged workers, employed, or unemployed
C. employed, unemployed, or not in the labor force
D. discouraged workers, employed, or not in the labor force
2. The labor force equals the
A. number of people who are employed.
B. number of people who are unemployed.
C. number of people employed plus the number of people unemployed.
D. adult population.
3. Who of the following would be counted as unemployed according to official statistics?
A. Shasta, who is waiting for her new job to start
B. Mary, who worked only 35 hours last week
C. Karen, who neither has a job nor is looking for one
D. None of the above would be counted as unemployed.
4. Which of the following would be counted as unemployed according to official statistics?
A. Brian, a full-time student who is not looking for work
B. Kate, who is on temporary layoff
C. Heath, who has retired and is not looking for work
D. All of the above would be counted as unemployed.
5. Who would not be included in the labor force?
A. Jay, who is on temporary layoff
B. Mike, who has retired and is not looking for work
C. Jane, who does not have a job, but has applied for several in the last week
D. None of the above are included in the labor force.
6. Who would be included in the labor force?
A. Holly, an unpaid homemaker
B. Tiffany, a full-time student not looking for work
C. Cody, who does not have a job, but is looking for work
D. None of the above are included in the labor force.
7. Who would be included in the labor force?
A. Karen, who works most of the week in a steel factory
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B. Beth, who is waiting for her new job at the bank to start
C. Dave, who does not have a job, but is looking for work
D. All of the above are included in the labor force.
8. Who would be included in the labor force?
A. Derrick, who is waiting for his new job to start
B. Brett, who has become discouraged looking for a job and has quit looking for awhile
C. Homer, an unpaid homemaker
D. None of the above would be included in the labor force.
9. Sally is on a temporary layoff from the factory where she makes plastic tableware. If
Sally participates in the BLS survey, she will be classified as
A. unemployed and in the labor force.
B. unemployed and out of the labor force.
C. employed and in the labor force.
D. employed and out of the labor force.
10. According to the Office of National Statistics, a husband who chooses to stay home
and take care of the household is
A. employed.
B. not in the labour force.
C. a discouraged worker.
D. unemployed.
11. A miner who has been unable to find work for so long that he has stopped looking for
work is considered to be
A. excluded from the labour force.
B. not in the adult population.
C. unemployed.
D. employed.
12. A person who is counted as unemployed by the BLS is
A. also in the labor force.
B. must be looking for work or on temporary layoff.
C. be age 16 or over.
D. All of the above are correct.
13. A college student who is not working or looking for a job is counted as
A. neither employed nor part of the labor force.
B. unemployed and in the labor force.
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C. unemployed, but not in the labor force.

D. employed and in the labor force.
14. Latoya, a homemaker who works as a volunteer at the local Red Cross and is
currently not looking for a job, is counted as
A. employed and in the labor force.
B. unemployed and in the labor force.
C. unemployed and not in the labor force.
D. not in the labor force.
15. The BLS defines the unemployment rate as the percentage of
A. those unemployed relative to the percentage employed.
B. labor force that is unemployed.
C. adult population that is unemployed.
D. labor force without fulltime employment.
16. The labor-force participation rate measures the percentage of the
A. total adult population that is in the labor force.
B. total adult population that is employed.
C. labor force that is employed.
D. labor force that is either employed or unemployed.
17. The labor-force participation rate is defined as
A. (Employed/Adult Population)*100.
B. (Employed/Labor Force)*100.
C. (Labor Force/Adult Population)*100.
D. (Adult Population/Labor Force)*100.
18. The unemployment rate is computed as the number of unemployed
A. divided by the labor force times 100.
B. divided by the number of people employed times 100.
C. divided by the adult population times 100.
D. times the participation rate times 100.
19. Which of the following definitions is correct?
A. Labor force = number of employed.
B. Labor force = population – number of unemployed.
C. Unemployment Rate = (number of unemployed/adult population)*100.
D. Unemployment Rate = (number of unemployed/[number of employed + number of
unemployed])*100.
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20. Suppose a country has 50 million people in adult population, labor force participation
rate is 60% and unemployment rate is 10%. The number of employed is
A. 1,5 million people
B. 27 million people
C. 30 million people
D. 47,5 million people
21. Suppose in an economy the number of employed is 8000 people, the number of
unemployed is 1000 people, the number of people not in the labor force is 500 people.
Unemployment rate is
A. 1,5%
B. 1,1%
C. 0,01%
D. 11%
22. (Continue question 21) Labor force is
A. 7500 people
B. 9000 people
C. 9500 people
D. 6500 people
23. The BLS recently reported that there were 48.6 million people over age 25 who had
at least a bachelor’s degree. Of this number, 38.0 million were in the labor force and 36.9
million were employed. What was the labor-force participation rate and the
unemployment rate for this group?
A. about 97 percent and about 2.9 percent
B. about 97 percent and about 2.3 percent
C. about 78 percent and about 2.9 percent
D. about 78 percent and about 2.3 percent
24. In 2000 in Japan, based on concepts similar to those used to compute U.S. employment
statistics, the unemployment rate was about 4.8 percent, the labor force participation rate
was about 62 percent, and the adult population was about 108 million. How many people
were employed and how many were unemployed?
A. about 63.8 million and 3.2 million.
B. about 63.8 million and 5.2 million.
C. about 67 million and 3.2 million.
D. about 67 million and 5.2 million.
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25. In 2000 in the United Kingdom, the adult population was about 46.5 million, the labor
force participation rate was 63.5 percent, and the unemployment rate was 5.8 percent.
What was the number of people employed and the number of people unemployed?
A. about 29.5 million and 2.7 million.
B. about 29.5 million and 1.7 million.
C. about 27.8 million and 2.7 million.
D. about 27.8 million and 1.7 million.
26. A few years ago, based on concepts similar to those used to estimate U.S. employment
figures, the Canadian adult non-institutionalized population was 24 million, the labor
force was 16 million, and the number of people employed was 14 million. According to
these numbers, the Canadian labor-force participation rate and unemployment rate were
A. 67 percent and 8.3 percent.
B. 67 percent and 12.5 percent.
C. 58 percent and 8.3 percent.
D. 58 percent and 12.5 percent.
27. Matt loses his job and decides to sit around at home for a few months. Ceteris paribus,
the unemployment rate
A. increases, and the labor-force participation rate is unaffected.
B. increases, and the labor-force participation rate increases.
C. decreases, and the labor-force participation rate increases.
D. decreases, and the labor-force participation rate decreases.
28. Anna has just finished school and started looking for a job, but has not yet found one.
As a result, the unemployment rate
A. increases, and the labor-force participation rate is unaffected.
B. increases, and the labor-force participation rate increases.
C. is unaffected, and the labor-force participation rate increases.
D. increases, and the labor-force participation rate decreases.
29. Tara has just finished school, but she is going to roam around the country awhile
before she starts looking for work. As a result, the unemployment rate
A. increases, and the labor-force participation rate increases.
B. is unaffected, and the labor-force participation rate is unaffected
C. increases, and the labor-force participation rate decreases.
D. increases, and the labor-force participation rate is unaffected.
30. Rick loses his job and immediately begins looking for another. Ceteris paribus,
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A. the unemployment rate is unaffected, and the labor-force participation rate increases.
B. the unemployment rate increases, and the labor-force participation rate decreases.
C. the unemployment rate increases, and the labor-force participation rate is unaffected.
D. the unemployment rate decreases, and the labor-force participation rate is unaffected.
31. If an unemployed person quits looking for work, ceteris paribus, the unemployment
rate
A. decreases, and the labor force participation rate increases
B. decreases, and the labor force participation rate decreases
C. stays the same, and the labor force participation rate decreases
D. and the labor force participation rate stay the same.
32. Between 2001 and 2002, the country of Aquilonia reported an increase in the number
of people who were employed. It also reported an increase in the unemployment rate.
Which of the following would best explain the two reports?
A. There was an increase in the size of the labor force between 2001 and 2002.
B. There was a decrease in the size of the labor force between 2001 and 2002.
C. There was an increase in the size of the adult population between 2001 and 2002.
D. The two reports are contradictory and can’t be reconciled.
Figure 28-1 is used for questions number 9 to 12.
Total population 195.4
Adult population 139.7
(Numbers are in millions)
Number of unemployed 5.7
Number of employed 92.3
33. Refer to Figure 28-1. The labour force is
A. 134.0 million.
B. 92.3 million.
C. 139.7 million.
D. 98.0 million.
34. Refer to Figure 28-1. The unemployment rate is
A. 3.2 percent.
B. 5.7 percent.
C. 5.8 percent.
D. 6.2 percent.
35. Refer to Figure 28-1. The labour force participation rate is
A. 47.1 percent.
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B. 65.9 percent.
C. 50.2 percent.
D. 70.2 percent.
36. The natural rate of unemployment is the
A. unemployment rate that would prevail with zero inflation.
B. rate associated with the highest possible level of GDP.
C. difference between the long-run and short-run unemployment rates.
D. amount of unemployment that the economy normally experiences.
37. The amount of unemployment that the economy normally experiences is known as
A. the natural rate of unemployment.
B. cyclical unemployment.
C. efficiency wage unemployment.
D. frictional unemployment.
38. The natural unemployment rate includes
A. both frictional and structural unemployment.
B. neither frictional nor structural unemployment.
C. structural, but not frictional unemployment.
D. frictional, but not structural unemployment.
39. There will be structural unemployment if
A. some wages are kept above the equilibrium level.
B. some people choose not to work at the equilibrium wage.
C. some wages are below the equilibrium level.
D. None of the above are correct.
40. Which of the following is a cause of frictional unemployment?
A. the minimum wage
B. a worker leaving a job to find one with better benefits
C. labor unions
D. All of the above are correct.
41. Cyclical unemployment refers to
A. the relation between the probability of unemployment and a worker’s changing level of
experience.
B. how often a worker is likely to be employed during her lifetime
C. year-to-year fluctuations of unemployment around its natural rate.
D. long-term trends in unemployment.
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42. Cyclical unemployment is closely associated with

A. long-term economic growth.
B. short-run ups and downs of the economy.
C. fluctuations in the natural rate of unemployment.
D. seasonal fluctuations in spending.
43. The natural rate of unemployment
A. is a constant.
B. is the desirable rate of unemployment.
C. cannot be altered by economic policy.
D. None of the above are correct.
44. Linh has just graduated from Foreign Trade University. She was very depressed
because the economy was going through a difficult time owing to Covid-19 pandemic, thus
she decided not to work and stayed home in order to watch the movie "Crash landing on
you" everyday. Linh is classified as
A. Frictional unemployment
B. Structural unemployment
C. Classical unemployment
D. Not in the labor force
45. Nancy is searching for a job that suits her tastes about where to live and the people
she works with. Laura is looking for a job that makes best use of her skills.
A. Nancy and Laura are both frictionally unemployed.
B. Nancy and Laura are both structurally unemployed.
C. Nancy is frictionally unemployed, and Laura is structurally unemployed.
D. Nancy is structurally unemployed, and Laura is frictionally unemployed.
46. Curtis is a stockbroker. He has had several job offers, but he has turned them down
because he thinks he can find a firm that better matches his tastes and skills. John is an
accountant. He has looked for work for some time, but no accounting firms are hiring.
A. John and Curtis are both frictionally unemployed.
B. John and Curtis are both structurally unemployed.
C. Curtis is frictionally unemployed, and John is structurally unemployed.
D. Curtis is structurally unemployed, and John is frictionally unemployed.
47. Tom is looking for work after school, but he is rejected by all the companies that he
fills out application. Simon has a law degree. Several firms have made him offers, but he
thinks he might be able to find a firm where his talents could be put to better use.
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A. Tom and Simon are both frictionally unemployed.

B. Tom and Simon are both structurally unemployed.
C. Tom is frictionally unemployed, and Simon is structurally unemployed.
D. Tom is structurally unemployed, and Simon is frictionally unemployed.
48. Minh is looking for work as a computer programmer. Although her prospects are
good she hasn’t yet taken a job. Linh is looking for work in a steel mill, but there aren’t
many job ads for steel workers and every time she shows up for an interview, there are
many more people than openings.
A. Minh and Linh are both frictionally unemployed.
B. Minh and Linh are both structurally unemployed.
C. Minh is frictionally unemployed, and Linh is structurally unemployed.
D. Minh is structurally unemployed, and Linh is frictionally unemployed.
49. Job search
A. explains why firms pay less than the competitive equilibrium wage.
B. is due simply to the failure of wages to balance labor supply and labor demand.
C. is the process of matching workers with appropriate jobs.
D. All of the above are correct.
50. People who are unemployed because of job search are best classified as
A. cyclically unemployed.
B. structurally unemployed.
C. frictionally unemployed.
D. discouraged workers.
51. Which of the following types of unemployment will exist even if the wage is at the
competitive equilibrium?
A. frictional unemployment
B. unemployment due to unions
C. unemployment due to efficiency wages
D. unemployment due to minimum-wage laws
52. In 2002, the demand for construction workers increased and the demands for textile
and steel workers diminished. This illustrates
A. frictional unemployment created by a sectoral shift.
B. structural unemployment created by a sectoral shift.
C. frictional unemployment created by efficiency wages.
D. structural unemployment created by efficiency wages.
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53. Frictional unemployment can be the consequence of

A. workers leaving existing jobs to find ones they like better.
B. an industry declining while another is growing.
C. changes in the working conditions offered by competing firms.
D. All of the above are correct.
54. Which of the following is a cause of frictional unemployment?
A. the minimum wage
B. a worker leaving a job to find one with better benefits
C. labor unions
D. All of the above are correct.
55. Economists have found evidence that receiving unemployment-insurance benefits
A. decreases the job-search effort of the unemployed.
B. has no effect on the job-search effort of the unemployed.
C. increases the job-search effort of the unemployed.
D. has an uncertain affect on the job-search effort of the unemployed.
56. If the minimum wage was currently above the equilibrium wage, than a decrease in
the minimum wage would
A. increase both the quantity demanded and the quantity supplied of labor.
B. decrease both the quantity demanded and the quantity supplied of labor.
C. increase the quantity of labor demanded and decrease the quantity supplied.
D. decrease the quantity of labor demanded and increase the quantity supplied.
57. Consumers decide to buy more computers and fewer typewriters. As a result,
computer companies expand production while typewriter companies lay-off workers.
This is an example of
A. structural unemployment created by efficiency wages.
B. cyclical unemployment created by a recession.
C. frictional unemployment created by a sectoral shift in demand.
D. None of the above are correct.
58. Which of the following is not a reason for unemployment in the labor market?
A. flexible wages
B. unions
C. job search
D. minimum-wage legislation
59. Which of the following is incorrect?
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A. Workers are less likely to quit jobs if the firm is paying a high wage.
B. Firms may find it profitable to pay wages above the equilibrium level in order to reduce
quits.
C. Paying high wages will create a surplus of workers.
D. Turnover means that firms occasionally fire workers to set an example for the other
workers.
60. Which of the following causes of unemployment is associated with a wage rate above
the market equilibrium level?
A. minimum wage laws
B. unions
C. efficiency wages
D. All of the above are correct.
61. A minimum wage law tends to
A. help all teenagers because they receive a higher wage than they would otherwise.
B. have no impact on unemployment as long as it is set above the competitive equilibrium
wage.
C. create more unemployment in high-skill job markets than in low-skill job markets.
D. create more unemployment in low-skill job markets than in high-skill job markets.
62. Which one of the following types of unemployment results from the wage being held
above the competitive equilibrium wage?
A. Structural unemployment
B. Cyclical unemployment
C. Frictional unemployment
D. Classical unemployment
63. If, for any reason, the wage is held above the competitive equilibrium wage,
A. the quantity of labour supplied will exceed the quantity of labour demanded and there
will be unemployment.
B. unions will likely strike and the wage will fall to equilibrium.
C. the quantity of labour demanded will exceed the quantity of labour supplied and there
will be a labour shortage.
D. the quality of workers in the applicant pool will tend to fall.
64. Which of the following is an example of a reason why firms pay efficiency wages?
A. At equilibrium wages, workers sleep when the boss is not looking because workers are
not deeply concerned about being fired.
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B. At equilibrium wages, workers often quit to find better jobs.

C. At equilibrium wages, only minimally qualified workers apply for the job.
D. At equilibrium wages, workers cannot afford a healthy diet so they fall asleep at work
due to a lack of energy.
E. All of these answers
65. Which of the following government policies would fail to lower unemployment rate?
A. Establishing worker training programs
B. Reducing unemployment benefits
C. Establishing employment agencies
D. Raising the minimum wage
66. Which of the following statements about efficiency wage theory is true?
A. Paying above the competitive equilibrium wage tends to cause workers to shirk their
responsibilities.
B. Firms do not have a choice about whether they pay efficiency wages or not because
these wages are determined by law.
C. Paying the lowest possible wage is always the most efficient (profitable).
D. Paying above the competitive equilibrium wage may improve worker health, lower
worker turnover, improve worker quality, and increase worker effort.
67. Unions tend to increase the disparity in pay between insiders and outsiders by
A. increasing the wage in the unionized sector, which may create a decrease in the supply
of workers in the non-unionized sector.
B. increasing the demand for workers in the unionized sector.
C. decreasing the demand for workers in the unionized sector.
D. increasing the wage in the unionized sector, which may create an increase in the supply
of workers in the non-unionized sector.

PART 2: EXERCISES
The Bureau of Labor Statistics announced that in April 2010, of all adult Americans,
139.455.000 were employed, 15.260.000 were unemployed, and 82.614.000 were not in the
labor force. Use this information to calculate:
a) the adult population
b) the labor force
c) the labor-force participation rate
d) the unemployment rate
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