Chapter 28 Unemployment

Multiple Choice
1. 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.
2. 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.
3. 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. changes in the minimum wage.
4. The natural rate of unemployment is the economist's notion of
a. full employment.
b. cyclical employment.

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1166  Chapter 28/Unemployment
c. structural unemployment.
d. frictional unemployment.
5. 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 is correct.
6. The natural rate of unemployment
a. refers mostly to unemployment created by the cyclical fluctuations in real GDP.
b. cannot be changed by government policy.
c. varies over time.
d. is the optimal rate of unemployment in an economy.
7. Which of the following is correct?
a. Some degree of unemployment is inevitable.
b. Other things the same an increase in the number of people who are unemployed is associated with a decrease in real
GDP.
c. Cyclical unemployment is inversely related to short-run economic fluctuations in GDP.
d. All of the above are correct.
8. Data on unemployment is reported
a. weekly.
b. monthly.
c. quarterly.
 Chapter 28/Unemployment  1167
d. yearly.
9. The BLS produces data on
a. unemployment.
b. types of employment.
c. length of the average workweek.
d. All of the above are correct.
10. Which of the following is not correct?
a. The unemployment rate is computed using the number of unemployment insurance claims filed.
b. Each adult included in the unemployment statistics is classified as employed, unemployed, or not in the labor force.
c. Unemployment numbers are based only on people aged sixteen and older.
d. The Bureau of Labor Statistics gathers data on unemployment and employment.
11. Unemployment data is collected
a. from unemployment insurance claims.
b. through a regular survey of about 60,000 households.
c. through a regular survey of about 200,000 firms.
d. Unemployment data is collected using all of the above.
12. The sum of which of the following would necessarily be equal to the adult population in the US statistics on labor?
a. employed, unemployed
b. discouraged workers, employed, unemployed
c. employed, unemployed, not in the labor force
d. discouraged workers, employed, not in the labor force
1168  Chapter 28/Unemployment
13. 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.
14. The labor force
a. equals the number of people employed.
b. equals the number of people employed plus the number of people unemployed.
c. equals the non-institutionalized adult population.
d. equals the number of people employed plus the number of people cyclically unemployed.
15. Ted is working part time. Alice is on temporary layoff. Who is counted as employed by the BLS?
a. only Ted
b. only Alice
c. both Ted and Alice
d. neither Ted nor Alice
16. Jack is a full-time unpaid homemaker not currently searching for other work. Jill is a full-time student who is not looking
for a job. Who does the BLS count in the labor force?
a. only Jack
b. only Jill
c. both Jack and Jill
d. neither Jack nor Jill
17. Assuming everyone in the question below is in the adult population, which of the following is not correct?
 Chapter 28/Unemployment  1169
a. Elmo works part time as a baby sitter. The BLS counts him as employed and in the labor force.
b. Anna is a full-time student not looking for a job. The BLS counts her as unemployed and in the labor force.
c. Jim is on temporary layoff. The BLS counts him as unemployed and part of the labor force.
d. Liz is seeking work, but has not found it. The BLS counts her as unemployed and in the labor force.
18. Who of the following would be counted as unemployed according to official statistics?
a. Mary, who is waiting for her new job to start
b. Karen, who worked only 35 hours last week
c. Shasta, who neither has a job nor is looking for one
d. None of the above would be counted as unemployed.
19. Which of the following would be counted as unemployed according to official statistics?
a. George, a full-time student who is not looking for work
b. Jenna, who is on temporary layoff
c. Larry, who has retired and is not looking for work
d. All of the above would be counted as unemployed.
20. Sam just lost his job, but isn't yet looking for a new one. Sam is
a. counted as unemployed and part of the labor force.
b. counted as unemployed, but not part of the labor force.
c. not counted as unemployed, but counted as part of the labor force.
d. not counted as unemployed or counted as part of the labor force.
21. Who would not be included in the labor force?
a. Sally, who is on temporary layoff
1170  Chapter 28/Unemployment
b. Sue, who has retired and is not looking for work
c. Kylie, who does not have a job, but has applied for several in the last week
d. None of the above is included in the labor force.
22. Who would be included in the labor force?
a. Dakota, an unpaid homemaker not looking for other work
b. Brad, a full-time student not looking for work
c. Maggie, who does not have a job, but is looking for work
d. None of the above is included in the labor force.
23. Who would be included in the labor force?
a. Karen, who works most of the week in a steel factory
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.
24. Who would be included in the labor force?
a. Homer, who is waiting for his new job to start
b. Michelle, who has become discouraged looking for a job and has quit looking for awhile
c. Derrick, an unpaid homemaker
d. None of the above would be included in the labor force.
25. Sally is on a temporary layoff from her factory job. 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.
 Chapter 28/Unemployment  1171
c. employed and in the labor force.
d. employed and out of the labor force.
26. Which of the following correctly ranks categories from smallest to largest according to recent U.S. statistics?
a. unemployed, employed, not in labor force
b. unemployed, not in labor force, employed
c. not in labor force, employed, unemployed
d. not in labor force, unemployed, employed
27. A person who is counted as unemployed by the BLS is
a. also in the labor force.
b. must have recently looked for work or be on temporary layoff.
c. be age 16 or over.
d. All of the above are correct.
28. Raphael is not working and is currently not looking for work. The BLS would count Raphael
a. as unemployed and in the labor force.
b. as unemployed, but not in the labor force.
c. in the labor force, but not as unemployed.
d. neither as unemployed nor in the labor force.
29. 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.
c. unemployed, but not in the labor force.
d. employed and in the labor force.
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30. Latoya, an unpaid homemaker who works as a volunteer at the local Red Cross and is currently not looking for a paid job,
is counted as
a. employed and in the labor force.
b. unemployed and in the labor force.
c. unemployed but not in the labor force.
d. not in the labor force.
31. The BLS defines the unemployment rate as the percentage of
a. those unemployed relative to those employed.
b. the labor force that is unemployed.
c. the adult population that is unemployed.
d. the labor force without fulltime employment.
32. 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.
33. 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 ÷ [number of employed + number of unemployed]) × 100.
d. Unemployment Rate = (number of unemployed ÷ adult population) × 100.
34. 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.
35. 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.

Labor Stats
The Labor Market
This table shows the 2003 data for males and females ages 16 and over in the imaginary country of Meditor.

1. Not in labor force

a. male: 45 million
b. female: 35 million
2. Unemployed
a. male: 5 million
b. female: 5 million
3. Employed
a. male: 85 million
b. female: 65 million
 Chapter 28/Unemployment  1173

36. Refer to Labor Stats. What is the adult population in Meditor?

a. 90 million
b. 150 million
c. 160 million
d. 240 million
37. Refer to Labor Stats. What is the adult labor force in Meditor?
a. 90 million
b. 150 million
c. 160 million
d. 240 million
38. Refer to Labor Stats. What is the adult unemployment rate in Meditor?
a. 4.12%
b. 6.25%
c. 11.11%
d. 12.50%
39. Refer to Labor Stats. What is the adult labor-force participation rate in Meditor?
a. 4.12%
b. 12.50%
c. 37.50%
d. 66.67%
40. Refer to Labor Stats. What is the adult female population in Meditor?
a. 35 million
b. 40 million
c. 70 million
d. 105 million
41. Refer to Labor Stats. What is the adult male population in Meditor?
a. 85 million
b. 120 million
c. 135 million
d. 240 million
42. Refer to Labor Stats. What is the adult female labor force in Meditor?
a. 35 million
b. 40 million
c. 70 million
d. 105 million
43. Refer to Labor Stats. What is the adult male labor force in Meditor?
a. 85 million
b. 90 million
c. 120 million
d. 135 million
44. Refer to Labor Stats. What is the adult female unemployment rate in Meditor?
a. 4.76%
b. 7.14%
c. 7.69%
d. 14.29%
45. Refer to Labor Stats. What is the adult male unemployment rate in Meditor?
a. 3.70%
b. 4.00%
c. 5.56%
d. 5.88%
46. Refer to Labor Stats. What is the adult female labor-force participation rate in Meditor?
a. 4.76%
b. 38.10%
c. 66.67%
d. 80.95%
47. Refer to Labor Stats. What is the adult male labor-force participation rate in Meditor?
a. 7.40%
1174  Chapter 28/Unemployment
b. 33.33%
c. 37.03%
d. 66.67%
48. In 2004, based on concepts similar to those used to estimate U.S. employment figures, the Canadian adult non-
institutionalized population was 25.022 million, the labor force was 16.956 million, and the number of people employed
was 15.864 million. According to these numbers, the Canadian labor-force participation rate and unemployment rate were
about
a. 67.8% and 6.4%
b. 67.8% and 4.4%
c. 63.4% and 6.4%
d. 63.4% and 4.4%
49. In 2004, based on concepts similar to those used to estimate U.S. employment figures, the Japanese adult non-
institutionalized population was 109.684 million, the labor force was 65.760 million, and the number of people employed
was 62.630 million. According to these numbers, the Japanese labor-force participation rate and unemployment rate were
about
a. 60%, 2.9%
b. 60%, 4.8%
c. 57.1%, 2.9%
d. 57.1%, 4.8%
50. In 2004, based on concepts similar to those used to estimate U.S. employment figures, the Italian adult non-institutionalized
population was 45.020 million, the labor force was 24.065 million, and the number of people employed was 22.105 million.
According to these numbers, the Italian labor-force participation rate and unemployment rate were about
a. 45.1%, 8.1%
b. 45.1%, 4.4%
c. 53.5%, 8.1%
d. 53.5%, 4.4%
51. In 2004, based on concepts similar to those used to estimate U.S. employment figures, the Swedish adult non-
institutionalized population was 6.712 million, the labor force was 4.576 million, and the number of people employed was
4.276 million. According to these numbers, the Swedish labor-force participation rate and unemployment rate were about
a. 59.5%, 4.5%
b. 59.5%, 6.6%
c. 68.2%, 4.5%
d. 68.2%, 6.6%
52. Suppose that in the small country of Sociopolis there are 6 million people in the adult population, that the labor-force
participation rate is 70 percent, and that there are 3.8 million people employed. To the nearest tenth, what is the
unemployment rate?
a. 10.5%
b. 9.5%
c. 6.7%
d. None of the above is correct.
53. The BLS reported in 2005 that there were 53.23 million people over age 25 who had at least a bachelor’s degree 40.59
million of them were employed and .98 million of them were unemployed. What were the labor-force participation rate and
the unemployment rate for this group?
a. 76.3% and 1.8%
b. 76.3% and 2.4%
c. 78.1% and 1.8%
d. 78.1% and 2.4%
54. The BLS reported in 2005 that there were 50.40 million people over age 25 whose highest level of education was some
college or an associate degree. 33.86 million of them were employed and 1.27 million of them were unemployed. About
what were the labor-force participation rate and the unemployment rate for this group?
a. 69.7%, 3.6%
b. 69.7%, 2.5%
c. 67.2%, 3.6%
d. 67.2%, 2.5%
55. The BLS reported in 2005 that there were 59.98 million people over age 25 whose highest level of education was a high
school degree or equivalent. From this group 36.40 million were employed and 1.93 million were unemployed. About what
were the labor-force participation rate and the unemployment rate for this group?
a. 60.7%, 5.0%
b. 63.9%, 5.0%
c. 60.7%, 3.2%
 Chapter 28/Unemployment  1175
d. 63.9%, 3.2%
56. The BLS reported in 2005 that there were 28.19 million people over age 25 who had no high school degree or its
equivalent. In this group 11.73 million were employed and 1.04 million were unemployed. About what were the labor-force
participation rate and the unemployment rate for this group?
a. 41.6% and 3.7%
b. 41.6% and 3.7%
c. 45.3% and 8.1%
d. 45.3% and 8.1%
57. Suppose that in some state the adult population is 4 million, the labor-force participation rate is 75%, and that .25 million
people are unemployed. What is the unemployment rate to the nearest tenth?
a. 6.3%
b. 7.7%
c. 8.3%
d. 9.1%
58. Suppose some country had an adult population of about 50 million, the labor-force participation rate was 60 percent, and
the unemployment rate was 5 percent. What were the number of people employed and the number of people in the labor
force?
a. 27.5 million, 30 million
b. 28.5 million, 30 million
c. 30 million, 31.5 million
d. 30 million, 32.5 million
59. Suppose some country had an adult population of about 25 million, the labor-force participation rate was 60 percent, and
the unemployment rate was 6 percent. What were the number of people employed and the number of people in the labor
force?
a. 11.75 million, and 12.5 million
b. 13.5 million and 15 million
c. 14 million, and 12.5 million
d. 14.1 million, and 15 million
60. Suppose some country had an adult population of about 46.5 million, the labor-force participation rate was 63.5 percent,
and the unemployment rate was 5.8 percent. What were 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.
61. Tom loses his job and immediately begins looking for another. Other things the same, the unemployment rate
a. increases, and the labor-force participation rate decreases.
b. increases, and the labor-force participation rate is unaffected.
c. is unaffected, and the labor-force participation rate increases.
d. decreases, and the labor-force participation rate is unaffected.
62. Matt loses his job and decides to sit on the beach rather than looking for work the next few months. Other things the same,
the unemployment rate
a. increases, and the labor-force participation rate is unaffected.
b. increases, and the labor-force participation rate decreases.
c. decreases, and the labor-force participation rate increases.
d. decreases, and the labor-force participation rate decreases.
63. Anna has just finished high school and started looking for her first 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.
64. Tara just graduated from college. In order to devote all her efforts to college, she didn’t hold a job. She is going to cruise
around the country on her motorcycle for 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.
65. If an unemployed person quits looking for work, ceteris paribus, the unemployment rate
1176  Chapter 28/Unemployment
a. decreases, and the participation rate increases.
b. decreases, and the participation rate decreases.
c. stays the same, and the participation rate decreases.
d. and the labor-force participation rate stay the same.
66. Between 2004 and 2005, 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 2004 and 2005.
b. There was a decrease in the size of the labor force between 2004 and 2005.
c. There was an increase in the size of the adult population between 2004 and 2005.
d. The two reports are contradictory and can't be reconciled.
67. President Bigego is running for re-election against Senator Pander. Bigego proclaims that more people are working now
than when he took office. Pander says that the unemployment rate is higher now than when Bigego took office. You
conclude that
a. one of them must be lying.
b. both of them could be telling the truth if the labor-force participation rate and the labor force both fell.
c. both of them could be telling the truth if the labor force grew slower than employment.
d. both of them could be telling the truth if the labor force grew faster than employment.
68. Which group has the highest labor-force participation rate?
a. black females
b. white females
c. white males
d. There are no significant differences in participation rates across these groups.
69. Among teenagers, which group has the highest unemployment rate?
a. white males
b. black females
c. black males
d. There are no significant differences in unemployment rates across these groups.
70. Which of the following is correct for people ages 20 and over?
a. Men have lower rates of labor-force participation and similar unemployment rates compared to women.
b. Men have lower rates of labor-force participation and higher rates of unemployment than do women.
c. Women have lower rates of labor-force participation and higher rates of unemployment compared to those of men.
d. Women have lower rates of labor-force participation and similar unemployment rates compared to those of men.
71. Which of the following is correct for people ages 20 and over?
a. Blacks have higher rates of labor-force participation and lower unemployment rates than those of whites.
b. Blacks have higher rates of labor-force participation and higher unemployment rates than those of whites.
c. Blacks have similar rates of labor-force participation and lower unemployment rates than those of whites.
d. Blacks have similar rates of labor-force participation and higher unemployment rates than those of whites.
72. Which of the following is correct?
a. Adults have higher labor-force participation rates and higher unemployment rates than do teenagers.
b. Adults have higher labor-force participation rates and lower unemployment rates than do teenagers.
c. Adults have lower labor-force participation rates and lower unemployment rates than do teenagers.
d. Adults have lower labor-force participation rates and higher unemployment rates than do teenagers.
73. The labor-force participation rate of the U.S. adult population (ages 16 and over) is about
a. 47 percent.
b. 55 percent.
c. 66 percent.
d. 74 percent.
74. Which of the following includes only demographic groups that have a participation rate of over 68%?
a. white males, white females, black males, and black females
b. white males and white females
c. white males and black males
d. white males
75. The participation rate of white teenagers is about
a. 83%
b. 63%
c. 47%
d. 28%
76. In the United States in recent years, for people age 20 and over, the unemployment rate of blacks has been
 Chapter 28/Unemployment  1177
a. less than that of whites.
b. about the same as that of whites.
c. about 50 percent higher than that of whites.
d. about double that of whites.
77. In the United States in recent years, the unemployment rate among teenagers has been
a. less than that of people ages 20 and over.
b. about the same as that of people ages 20 and over.
c. about twice that of people ages 20 and over.
d. more than three times that of people ages 20 and over.
78. The Congressional Budget Office estimated that the natural rate of unemployment is about
a. 3.9 percent
b. 4.5 percent
c. 5.2 percent
d. 5.9 percent
79. Which list contains two periods when the unemployment rate was below the natural rate of unemployment?
a. 1965-1968, 1981-1984
b. 1965-1968, 1997-2000
c. 1981-1984, 1991-1994
d. 1991-1994, 1997-2000
80. Since World War II, the labor-force participation rate
a. has increased for both men and women.
b. increased for women and decreased for men.
c. has decreased for both men and women.
d. decreased for women and increased for men.