ECON 2410 Chapter 6: Chapter 6- The Labour Market.pdf

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19 Mar 2014

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Non institutional population the number of people potentially available for civilian employment. Labor force the sum of those employed and unemployed. Participation rate the ratio of the labor force to the noninstitutional civilian population. Unemployment rate the ratio of the number of unemployed to the labor force. Separations workers who are leaving or losing their jobs. Quits workers leaving their jobs for what they perceive as better alternatives. Layoffs workers who lose their jobs either temporarily or permanently. Discouraged workers a person who has given up looking for employment. Reservation wage the age that would make them indifferent between working or being unemployed. Efficiency wage the wage at which a worker is performing a job most efficiently or productively. Aggregate national wage see the equation below (cid:1849)(cid:3404)(cid:1842)(cid:3032)(cid:1832)(cid:4666)(cid:1873),(cid:1878)(cid:4667) (cid:4666)(cid:3398),(cid:3397)(cid:4667) The aggregate national wage (cid:1849)depends on three factors: A catchall variable (cid:1878)that stands for all other variables that may affect the outcome of wage setting.

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Another important measure of how an economy is performing is the unemployment rate. But there is more to the unemployment rate than just the headline rate reported on the news. In particular we are going to look at the U3 rate (the Headline rate), the U6 rate and the labor force participation rate. Go to the Bureau of Labor Statistics On their home page from the menu on the right hand side of the page "Latest Numbers" click on Unemployment Rate. On the next page click on "Employment Situation Summary". The December 2014 report should be available. Read the report. Then using the tables linked from the bottom of the report find: The U3 rate; The U6 rate; and, The labor force participation rate. What are the differences among these measures? Note the percentages of each, what each measure includes and then express your views on what factors may be causing the U6 rate to be roughly twice the U3 rate and what may be causing the decline in the labor participation rate? Is the headline rate used by the most news report misleading? For your information, here is a summary of the six unemployment measures. â¢U-1, persons unemployed 15 weeks or longer, as a percent of the civilian labor force; â¢U-2, job losers and persons who completed temporary jobs, as a percent of the civilian labor force; â¢U-3, total unemployed, as a percent of the civilian labor force (this is the definition used for the official unemployment rate); â¢U-4, total unemployed plus discouraged workers, as a percent of the civilian labor force plus discouraged workers; â¢U-5, total unemployed, plus discouraged workers, plus all other marginally attached workers, as a percent of the civilian labor force plus all marginally attached workers; and â¢U-6, total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers.

Severe unemployment is socially catastrophic. Mark all items below that can occur due to unemployment.

Increased Spending

Increased work hours for other family members

Increased Savings

Uninterrupted schooling

Increased Stress

Postponed medical care

Utilities cut off

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Question 51 pts

What years was the unemployment rate equal to or great than 10%?

1929-1933, 1937-1938, 1981-1982, 2007-2009

1928-1932, 1936-1937, 1980-1981, 2008-2010

1929-1933, 1936-1937, 1980-1981, 2007-2009

1928-1930, 1937-1938, 1981-1982, 2008-2010

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Question 61 pts

The unemployment rate is understated due to:

None of the above.

Part-time workers being counted as unemployed

Discouraged workers not counted in the labor force

Underemployed workers being counted an unemployed

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Question 71 pts

True or False. The Labor force participation rate is the percentage of adults in an economy who are either employed or who are unemployed and looking for a job.

True

False

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Question 81 pts

True or False. The Bureau of Labor Statistics reports the percentage of labor force unemployed utilizing the current population survey.

True

False

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Question 91 pts

Mark all that apply. Over time the unemployment rate.....

does not fluctuate over time

an upward or downward trend in unemployment rates is apparent

never falls all the way to zero

the timing of rises and falls in unemployment do not match the timing of upswings and downswings in the overall economy

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Question 101 pts

According to the graphs presented by the author in this chapter, which group had the highest unemployment rate in 2010?

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Question 111 pts

According to the information presented by the author in this chapter, which group had the highest unemployment rate in 2015?

New entrants

Re-entrants

Job Losers: non-temporary

Job Leavers

Job Losers: temporary

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Question 121 pts

According to the information presented by the author in this chapter, which group had the highest unemployment rate in 2015?

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Question 131 pts

True or False. An international comparison of unemployment rates across countries can be easily accomplished.

True

False

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Question 141 pts

Mark all that apply. Wages are sticky downward due to:

Implicit contract

Insider-outsider model

Efficiency Wage Theory

Adverse selection of wage cuts argument

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Question 151 pts

Match the word to the correct definition.

Cyclical

[ Choose ] unemployment that occurs as workers move between jobs unemployment that occurs because individuals lack skills valued by employers or the Geographic distribution of jobs changes unemployment closely tied to the business cycle, like higher unemployment during a recession

Frictional

Structural

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Question 161 pts

A financial analyst who quits his/her job in Chicago and is pursuing similar work in Arizona. What type of unemployment occurred?

Structural

Cyclical

Frictional

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Question 171 pts

True or False. With productivity low, average levels of unemployment will tend to be somewhat higher on average.

True

False

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Question 181 pts

True or False. Unemployment benefits in the United States are only federally controlled.

True

False

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Question 191 pts

True or False. The natural rate of unemployment will never be zero due to cyclical and frictional unemployment.

True

False

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Question 201 pts

True or False. Public policies to assist the unemployed as it relates to the supply side of the labor market affect how eager people are to find work

True

False

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1. The introduction of a union into a monopsony labor market will cause employment in this market to

A. Rise

B. Fall

C. Remain constant

D. Change in a manner than cannot be determined without additional info.

2. Unions may attempt to increase the demand for union workers by

A. Advocating boycotts of nonunion products

B. Lobbying for trade restrictions

C. Lobbying for laws that restriuct the availability of substitute labor inputs

D. All of the above

E. None of the above

3. As a result of the scale effect associated with a higher wage, the quantity of labor demanded is expected to

A. Fall

B. Rise

C. Remain unchanged

D. Change in an unpredictable manner

4. If a union successfully urges consumers to boycott products produced by nonunion workers, the own-wage elasticity of demand for union labor is reduced

A. Under no circumstances

B. Because the scale effect resulting from a change in the wage will be smaller in magnitude since the boycott lowers the price elasticity of demand for output

C. Because the substitution effect in the labor market resulting from a change in the wage will be smaller in magnitude since the boycott lowers the price elasticity of demand for output

D. Because labor demand falls in response to the boycott

5. union sponsored boycotts of products produced by nonunion workers will affect the elasticity of demand for union workers by affecting the

A. Substitution effect in the labor market

B. Scale effect in the labor market

C. None of the above

6. In a local labor market

A. There are many employers and employees in most local areas

B. Foreign citizens are not allowed to apply for jobs

C. Most employer and employee search is conducted at the national level

D. There are few potential employers and employees in most local areas

7. Economic theory predicts that the cost of general training will be

A. Borne by workers

B. Borne by firms

C. Shared between workers and firms

D. None of the above

8. During a recession, firms are most likely to layoff workers who possess

A. only firm-specific training

B. only general training

9. Productivity is likely to decline by more during a recession for those labor markets in which workers possess a high level of

A. General training

B. Firm-specific training

C. Either general or firm-specific training

D. None of the above

10. Suppose that some previously discouraged workers start looking for work because they become more optimistic about their prospects. The immediate effect of this is expected to be

A. An increase in the unemployment rate

B. A decrease in the unemployment rate

C. An unchanged unemployment rate

D. A reduction in the labor force participation rate

11. The introduction of government-mandated health insurance for all employees would result in a substitution effect that

A. Raises employment and increases the length of the workweek

B. Lowers employment and reduces the length of the workweek

C. Reduces employment and raises the length of the workweek

D. Increases employment and reduced the length of the workweek

12. As the wage rate increases, the quantity of labor demanded will decrease

A. Under no circumstances

B. Only if the substitution effect exceeds the scale effect

C. Only if the scale effect exceeds the substitution effect

D. As a result of both the substitution and scale effects

ECON 2410 Chapter 6: Chapter 6- The Labour Market.pdf

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