Principles of Economics

Steven A. Greenlaw, David Shapiro

Chapter 21

Unemployment - all with Video Answers

Educators

Chapter Questions

Problem 1

Suppose the adult population over the age of 16 is 237.8 million and the labor force is 153.9 million (of whom 139.1 million are employed.). How many people are "not in the labor force?" What are the proportions of employed, unemployed and not in the labor force in the population? Hint: Proportions are percentages.

Oluwadamilola Ameobi

Oluwadamilola Ameobi

Numerade Educator

Problem 2

Using the above data, what is the unemployment rate? These data are U.S. statistics from 2010. How does it compare to the February 2015 unemployment rate computed earlier?

Karan Sood

Numerade Educator

Problem 3

Over the long term, has the U.S. unemployment rate generally trended up, trended down, or remained at basically the same level?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 4

Whose unemployment rates are commonly higher in the U.S. economy:
a. Whites or nonwhites?
b. The young or the middle-aged?
c. College graduates or high school graduates?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 5

Beginning in the 1970 s and continuing for three decades, women entered the U.S. labor force in a big way. If we assume that wages are sticky in a downward direction, but that around 1970 the demand for labor equaled the supply of labor at the current wage rate, what do you imagine happened to the wage rate, employment, and unemployment as a result of increased labor force participation?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 6

Is the increase in labor force participation rates among women better thought of as causing an increase in cyclical unemployment or an increase in the natural rate of unemployment? Why?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 7

Many college students graduate from college before they have found a job. When graduates begin to look for a job, they are counted as what category of unemployed?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 8

What is the difference between being unemployed and being out of the labor force?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 9

How do you calculate the unemployment rate? How do you calculate the labor force participation rate?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 10

Are all adults who do not hold jobs counted as unemployed?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 11

If you are out of school but working part time, are you considered employed or unemployed in U.S. labor statistics? If you are a full time student and working 12 hours a week at the college cafeteria are you considered employed or not in the labor force? If you are a senior citizen who is collecting social security and a pension and working as a greeter at Wal-Mart are you considered employed or not in the labor force?

Kevin Simons

Numerade Educator

Problem 12

What happens to the unemployment rate when unemployed workers are reclassified as discouraged workers?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 13

What happens to the labor force participation rate when employed individuals are reclassified as unemployed? What happens when they are reclassified as discouraged workers?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 14

What are some of the problems with using the unemployment rate as an accurate measure of overall joblessness?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 15

What criteria do the BLS use to count someone as employed? As unemployed?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 16

Assess whether the following would be counted as "unemployed" in the Current Employment Statistics survey.
a. A husband willingly stays home with children while his wife works.
b. A manufacturing worker whose factory just closed down.
c. A college student doing an unpaid summer internship.
d. A retiree.
e. Someone who has been out of work for two years but keeps looking for a job.
f. Someone who has been out of work for two months but isn't looking for a job.
g. Someone who hates her present job and is actively looking for another one.
h. Someone who decides to take a part time job because she could not find a full time position.

Kevin Simons

Numerade Educator

Problem 17

Are U.S. unemployment rates typically higher, lower, or about the same as unemployment rates in other high-income countries?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 18

Are U.S. unemployment rates distributed evenly across the population?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 19

When would you expect cyclical unemployment to be rising? Falling?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 20

Why is there unemployment in a labor market with flexible wages?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 21

Name and explain some of the reasons why wages are likely to be sticky, especially in downward adjustments.

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 22

What term describes the remaining level of unemployment that occurs even when the economy is healthy?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 23

What forces create the natural rate of unemployment for an economy?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 24

Would you expect the natural rate of unemployment to be roughly the same in different countries?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 25

Would you expect the natural rate of unemployment to remain the same within one country over the long run of several decades?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 26

What is frictional unemployment? Give examples of frictional unemployment.

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 27

What is structural unemployment? Give examples of structural unemployment.

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 28

After several years of economic growth, would you expect the unemployment in an economy to be mainly cyclical or mainly due to the natural rate of unemployment? Why?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 29

What type of unemployment (cyclical, frictional, or structural) applies to each of the following:
a. landscapers laid off in response to a drop in new housing construction during a recession.
b. coal miners laid off due to EPA regulations that shut down coal fired power
c. a financial analyst who quits his/her job in Chicago and is pursing similar work in Arizona
d. printers laid off due to drop in demand for printed catalogs and flyers as firms go the internet to promote an advertise their products.
e. factory workers in the U.S. laid off as the plants shut down and move to Mexico and Ireland.

Kevin Simons

Numerade Educator

Problem 30

Using the definition of the unemployment rate, is an increase in the unemployment rate necessarily a bad thing for a nation?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 31

Is a decrease in the unemployment rate necessarily a good thing for a nation? Explain.

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 32

If many workers become discouraged from looking for jobs, explain how the number of jobs could decline but the unemployment rate could fall at the same time.

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 33

Would you expect hidden unemployment to be higher, lower, or about the same when the unemployment rate is high, say $10 \%,$ versus low, say 4\%? Explain.

Jennifer Stoner

Jennifer Stoner

Numerade Educator

Problem 34

Is the higher unemployment rates for minority workers necessarily an indication of discrimination? What could be some other reasons for the higher unemployment rate?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 35

While unemployment is highly negatively correlated with the level of economic activity, in the real world it responds with a lag. In other words, firms do not immediately lay off workers in response to a sales decline. They wait a while before responding. Similarly, firms do not immediately hire workers when sales pick up. What do you think accounts for the lag in response time?

Natalie Britton

Natalie Britton

Numerade Educator

Problem 36

Why do you think that unemployment rates are lower for individuals with more education?

Prashant Bana

Numerade Educator

Problem 37

Do you think it is rational for workers to prefer sticky wages to wage cuts, when the consequence of sticky wages is unemployment for some workers? Why or why not? How do the reasons for sticky wages explained in this section apply to your argument?

Prashant Bana

Numerade Educator

Problem 38

Under what condition would a decrease in unemployment be bad for the economy?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 39

Under what condition would an increase in the unemployment rate be a positive sign?

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 40

As the baby boom generation retires, the ratio of retirees to workers will increase noticeably. How will this affect the Social Security program? How will this affect the standard of living of the average American?

Prashant Bana

Numerade Educator

Problem 41

Unemployment rates have been higher in many European countries in recent decades than in the United States. Is the main reason for this long-term difference in unemployment rates more likely to be cyclical unemployment or the natural rate of unemployment? Explain briefly.

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 42

Is it desirable to pursue a goal of zero to unemployment? Why or why not?

Oluwadamilola Ameobi

Oluwadamilola Ameobi

Numerade Educator

Problem 43

Is it desirable to eliminate natural unemployment? Why or why not? Hint: Think about what our economy would look like today and what assumptions would have to be met to have a zero rate of natural unemployment.

Kaylee Mcclellan

Kaylee Mcclellan

Numerade Educator

Problem 44

The U.S. unemployment rate increased from 4.6\% in July 2001 to $5.9 \%$ by June $2002 .$ Without studying the subject in any detail, would you expect that a change of this kind is more likely to be due to cyclical unemployment or a change in the natural rate of unemployment? Why?

Oluwadamilola Ameobi

Oluwadamilola Ameobi

Numerade Educator