Macroeconomics 2nd Edition Karlan Test Bank

Macroeconomics 2nd Edition Karlan
Test Bank
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Chapter 09 Test Bank
Student: _______________________________________________________________________________________
1. During periods of recession unemployment:

A. is more common.
B. is less common.
C. is uncorrelated to periods of recession.
D. rates are the same for all groups of the working population.
2. Unemployment rates tend to be highest during periods of:

A. recession.
B. economic boom.
C. recovery.
D. static movement.
3. We may note that unemployment:

A. exists at any time during the business cycle.
B. only occurs during times of recession.
C. is highest during times of economic booms.
D. tends to increase during times of economic recovery.
4. Policies designed to protect workers:

A. include minimum wage laws.
B. include unionization laws.
C. can lead to unemployment.
D. All of these are true.
5. One consequence of unemployment is that:

A. some productive potential of the economy is being wasted.
B. the time and skills of the unemployed are not being put to use.
C. it can create uncertainty about the future.
D. All of these are consequences of unemployment.
6. Unemployment:
A. changes primarily because of macroeconomic forces.
B. can have serious social consequences.
C. can create uncertainty about the future.
7. Unemployment occurs when someone:

A. wants to work but cannot find a job.
B. is not working full-time.
C. should be working but chooses not to.
D. has useful skills that are not being used.
8. The government office in charge of collecting official employment statistics is the:

A. Bureau of Labor Statistics.
B. Bureau of Economic Analysis.
C. Bureau of Industry and Security.
D. Bureau of the Census.
9. In the United States, the working-age population refers to the:
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A. civilian, noninstitutional population aged 16 and over.
B. population of those aged 16 and over.
C. civilian, noninstitutional population of those between age 16 and age 64.
D. noninstitutional population of those between ages 16 and 64.
10. For economic purposes in the United States, the working-age population does not include:
A. anyone in the military.
B. someone who is 16 and does not want to work.
C. someone who is 65.
D. anyone without a driver’s license.
11. For economic purposes in the United States, the working-age population does include people:
A. in prison.
B. in the military.
C. less than 16 years old.
D. over the age of 16.
12. In the United States, to count as unemployed, you must:

A. be younger than 65 years old.
B. actively looking for work.
C. be skilled enough to hold a job.
13. The labor force excludes those:

A. younger than age 16 years old.
B. who don't want to work.
C. who are disabled and can't work.
D. The labor force excludes all of these.
14. The labor force does not include people in the working-age population who are:
A. employed.
B. not actively trying to find a job.
C. retired, a full-time student, or stay-at-home parent.
D. employed part time.
15. The unemployment rate:

A. is measured by the number of people who are unemployed divided by the labor force.
B. is never zero.
C. measures what percentage of our labor force is currently looking for a job and can't find one.
16. The unemployment rate tells us:

A. what percentage of the labor force wants to work and can't find a job.
B. who is currently unemployed.
C. why the unemployed can't find work.
D. the number of people who really don’t want to work.

A. what percentage of the labor force want to work and can't find a job.
B. who is being affected by the fluctuations of the economy.
C. how to solve the problem of unemployment.
D. what portion of the population is causing the economy to languish.
18. In general, the unemployment rate does not vary greatly by:
A. educational status.
B. gender.
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C. age.
D. height
19. On average, younger people have:

A. higher unemployment rates than older people.
B. lower unemployment rates than older people.
C. similar unemployment rates than older people.
D. uncorrelated unemployment rates compared to those of older people.
20. People with less education are:

A. more likely to be unemployed than people with more education.
B. less likely to be unemployed than people with more education.
C. just as likely to be unemployed than people with more education.
D. not comparable to people with more education.
21. The labor force participation rate:

A. is measured by the labor force divided by the total population.
B. tells us what fraction of the working-age population wants to be working.
C. typically rises during periods of recession.
D. is measured by those employed divided by the working-age population.
22. Economists report changes in unemployment in:

A. percentage points, not percentages.
B. percentages, not percentage points.
C. percentage points or percentages, interchangeably.
D. nominal figures; they rarely use percentages or percentage point changes.

A. tells us what fraction of the working-age population wants to be working, whether or not they actually
have a job.
B. typically rises during times of recession, as more people need work.
C. is used as an indication of the health of the overall economy.
24. During times of recession, the labor force participation rate typically:
A. rises, as more people need work.
B. rises, as more incomes per household are needed to make ends meet.
C. falls, as more people give up and stop looking for work.
D. falls, as more people cannot find work, they stay in jobs that aren't a good fit.
25. Some people drop out of the labor force during times of recession:
A. to go back to college, because the opportunity cost is lower during a recession.
B. because they cannot find work and give up trying.
C. and decide to take early retirement.
26. In 2015, the labor force participation rate was 62.6 percent. This means that:
A. 62.6 % of all working age people wanted a job.
B. there was 37.4 % unemployment.
C. 62.6 % of all working age people were employed.
D. only 62.4 percent of labor force was in working age population.
27. The unemployment rate may:

A. understate the effect of a recession on employment because some leave the labor force.
B. understate the effect of a recession on employment because many enter the labor force.
C. overstate the effect of a recession on employment because some leave the labor force.
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D. overstate the effect of a recession on employment because many enter the labor force.
28. If you hear that unemployment increased in the last year by 3.5 percentage points to 8 %it means:
A. 35 out of every 100 people lost their job in the last year.
B. 35 out of every 1,000 people lost their job in the last year.
C. 8 out of every 1,000 people who want a job can't find one.
D. 80 out of every 100 people who want a job can't find one.
29. If you hear that unemployment decreased by 2 percentage points to 6 %in the past year, while the
labor force participation rate remained constant, it means:
A. on a net basis, 2 out of every 10 people lost their job in the last year.
B. on a net basis, 20 out of every 1,000 unemployed persons found a job in the last year.
C. on a net basis, 2 out of every 100 people lost their job in the past year.
D. on a net basis, 4 out of every 100 unemployed persons found a job in the last year.
30. If you hear that unemployment increased by 2 percentage points to 4 %in the past year, while the
labor force participation rate and the population remained constant, it means:
A. unemployment doubled in the past year.
B. there was a 100 percent increase in unemployment.
C. twice as many people are without work than was the case a year ago.
31. Discouraged workers are people who have:

A. looked for work in the past year but have given up looking because of the condition of the labor market.
B. not looked for work in the past year but would take a job if one was offered to them.
C. looked for work in the past year but decided to leave the labor market to go back to school, retire, or be
a stay-at-home parent.
D. not looked for work in over a year because of the condition of the labor market.
32. Someone who is underemployed is someone who:

A. is working part-time, but wants full-time employment.
B. is working in a job for which he is overqualified.
C. could be contributing more output to society by either working more, or by working using more
advanced skills he possesses but doesn't currently use.
D. All of these describe someone who is underemployed.
33. Matt is a college graduate who majored in creative writing and currently works at a local bookstore as
a sales clerk. The best way to describe Matt is to say he is:
A. unemployed.
B. a discouraged worker.
C. underemployed.
D. overemployed.
34. Jen has a PhD in economics and has been working for 3 years part-time as an instructor; she has
always hoped to be hired as a full-time faculty member. The best way to describe Jen is to say she is:
A. a discouraged worker.
B. unemployed.
C. underemployed.
D. overemployed.
35. Marc is a high school graduate and currently works as a corrections officer at a local prison. He would
like to go back to school to train to become a police officer someday. The best way to describe Marc is to
say he is:
B. unemployed.
C. underemployed.
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D. employed.
36. John earned a PhD in biomedical engineering, and works full-time as a faculty member at the local
university. He also does some private consulting work on the side. He would like to give up teaching and
do consulting full-time, but he fears there isn't enough demand for it. The best way to describe John is to
say he is:
B. underemployed.
C. overemployed.
D. employed.
37. Sonia has a BAin art history, and is currently working full-time as a waitress. The Bureau of Labor
Statistics would count Sonia as:
A. employed.
B. underemployed.
C. unemployed.
D. a discouraged worker.
38. Sasha has a master's degree in writing, and currently works full-time as a 2nd grade classroom helper.
She submits articles for the local paper on occasion, and gets paid only when the editor agrees to publish
a submission. Sasha would love to be a full-time reporter. The best way to describe Sasha is to say she is
________________; the Bureau of Labor Statistics would count Sasha as ____________.
A. underemployed; employed
B. employed; employed
C. discouraged; underemployed
D. underemployed; underemployed
39. The Bureau of Labor Statistics counts underemployed persons as those who are currently working:
A. less than they would like to be.
B. in a job for which they are overqualified for.
C. less hours than their employer requires full-time workers to work.
D. in a field that doesn’t add a lot to overall GDP.
40. The Bureau of Labor Statistics collects _______ measures of unemployment.

A. 4
B. 5
C. 6
D. 7
41. The Bureau of Labor Statistics measures unemployment by surveying:

A. every household at least once a year.
B. a sample of about 60,000 households every month.
C. a sample of about 60,000 employers every month.
D. every business at least once a year.
42. The survey the Bureau of Labor Statistics uses to collect unemployment data is called the:
A. current population survey.
B. census population survey.
C. census employment survey.
D. current employment survey.
43. The labor demand curve:

A. shows the relationship between the total quantity of labor demanded by all the firms in the economy
and the wage rate.
B. shows that, all things being equal, firms will want to hire more labor when wages are lower and less
labor when wages are higher.
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C. has a negative slope.

A. is provided by firms who want to hire workers at each given wage.
B. is made up of workers who want to work for firms at each given wage.
C. shows number of workers who are willing and able to work at higher wages.
D. shows that the number of people who want to work increases as the wage increases.
45. The labor supply curve:

A. is made up of firms who want to hire workers at each given wage.
C. shows number of firms who are willing and able to hire workers at each given wage.
D. shows that the number of firms who want to hire workers decreases as the wage increases.

A. shows the relationship between the total quantity of labor supplied by all firms in the economy and the
wage rate.
B. shows that, all things being equal, more workers will want to work when wages are higher and less will
want to work when wages are lower.
47. If we wanted to describe unemployment in terms of supply and demand, we could say:
A. there is a surplus of labor.
B. at the prevailing wage, the demand is greater than the supply of labor.
C. the quantity of those demanding labor is greater than those supplying labor.
48. The equilibrium price of labor is called:

A. the wage.
B. income, plus benefits.
C. opportunity cost.
D. the leisure trade-off.
49. When the prevailing market wage is above equilibrium, we say:

A. there is no unemployment.
B. there is a surplus of labor.
C. the quantity of labor demanded is more than the quantity supplied.
50. When the prevailing market wage is above equilibrium:

A. the surplus of labor is the amount of unemployment in the market.
B. the difference between the quantity supplied and the quantity of labor demanded is unemployment.
C. unemployment occurs.
51. The normal level of unemployment that persists in an economy in the long run is:
A. called the natural rate of unemployment.
B. also called the equilibrium rate of underemployment.
C. zero when the market is equilibrium.
D. always achieved in the real world.
52. The natural rate of unemployment:

A. is typically zero.
B. is the normal level of unemployment in an economy in the long run.
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C. is constant over time.
D. None of these is true.
53. Which type of unemployment leads to a natural rate of unemployment above zero?
A. The natural rate of unemployment is always zero.
B. Frictional unemployment
C. Unemployment of government workers
D. Cyclical unemployment
54. Which type of unemployment does not contribute to the natural rate of unemployment?
A. Frictional
B. Structural
C. Real-wage
D. Cyclical
55. Which type of unemployment contributes to the natural rate of unemployment?

A. Real-wage unemployment
B. Cyclical unemployment
C. Unemployment of government workers.
D. All of these contribute to the natural rate.
56. Frictional unemployment is:

A. a mismatch between the skills workers can offer and the skills that are in demand.
B. unemployment caused by workers who are changing their location, job, or career.
C. the effect of wages remaining persistently above the market-clearing level.
D. the most alarming cause of unemployment.
57. Structural unemployment is:

D. when workers voluntarily quit their jobs.
58. Real-wage unemployment is:

D. also called cyclical unemployment.
59. Johnny has been working in a sandwich shop full-time while he attends college. When he graduates,
he quits the sandwich shop and begins to search for full-time employment related to his college degree.
Johnny would be considered:
A. frictionally unemployed.
B. structurally unemployed.
C. cyclically unemployed.
D. classically unemployed.
60. Jake just quit his job as a shoe salesman and is looking for work as an accountant, which is what his
college degree is in. Jake would be considered:
B. structurally unemployed
D. Jake is not in the labor force.
61. Sue just quit her job as a librarian to pursue her lifelong dream of getting a job as a teacher. Sue
would be considered:
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C. seasonally unemployed.
D. Sue is not in the labor force.
62. Bob just graduated from college and has just landed his first job with a local accounting firm that will
start in three months. Bob plans to use that time to find a place to live, and adjust to the new area. Bob
B. employed.
C. structurally unemployed.
D. Bob is not in the labor force.
63. Carol is a coal miner who just got laid off when the last coal mine in the area was shut down. She has
looked everywhere for another job as a miner, but cannot find one. Given that Carol is unlikely to find
another job as a miner, she would be considered:
C. real-wage unemployed.
D. Carol is a discouraged worker.
64. Sonia was a great bookkeeper 20 years ago, then left the workforce to stay home and raise her
children. Now that they're in college, Sonia looks for another bookkeeping job, but they all require
computer skills that she doesn't have. Sonia would be considered:
C. Sonia is not in the labor force..
D. seasonally unemployed.
65. Don worked as a machinist all his life, and was recently laid off because his plant closed and the jobs
were outsourced to India. There don't seem to be any machinist jobs in the area anymore. Don would be
considered:
D. Don is a discouraged worker.
66. Sarah used to be a music teacher at a local school, but got let go last year due to budget cuts. Sarah
now works part-time as a waitress while looking for another teaching job. Sarah would be considered:
B. underemployed.
D. real-wage unemployed.
67. Fred was working as a sales rep for a firm, and just completed an MBA by taking courses at night.
Fred quits his job to pursue a management position. Fred would be considered:
A. underemployed.
B. frictionally unemployed.
68. One way for governments to try and minimize the effects of structural unemployment is to:
A. provide information to unemployed people about which professions are experiencing rising demand for
labor.
B. subsidize retraining programs for unemployed workers to learn new skills.
C. offer low-interest loans to unemployed workers to go back to school to learn new skills.
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D. All of these are ways the government can deal with structural unemployment.
A. subsidize retraining programs.
B. increase unemployment benefits.
C. mandate employers cannot fire anyone.
D. All of these are ways that would minimize the effects of structural unemployment.
70. When governments provide information to unemployed people about which professions are
experiencing rising demand for labor, they are trying to minimize the effects of which kind of
unemployment?
A. Frictional unemployment
B. Structural unemployment
C. Seasonal unemployment
71. When governments subsidize retraining programs for unemployed workers to learn new skills, they
are trying to minimize the effects of which kind of unemployment?
A. Frictional
B. Structural
C. Seasonal
D. Real-wage
72. Real-wage unemployment can be caused by which of the following?

A. Minimum wage laws
B. Retraining programs
C. Low-interest student loans
D. None of these cause real-wage unemployment.
73. Classical unemployment can be caused by which of the following?

B. Bargaining by unions
C. Efficiency wages
D. All these create classical unemployment.
74. When the economy goes through ups and downs over time:
A. it is not reflected by changes in GDP growth.
B. economists call this pattern the business cycle.
C. it affects the supply of labor.
75. The business cycle matters for unemployment because:

A. it affects the demand for labor.
B. it affects the supply of labor.
C. Both of these are true.
D. Neither of these is true.
76. When the economy is going strong the:

A. demand for workers increases.
B. supply of workers increases.
C. demand for workers decreases.
D. supply of workers decreases.
77. When the economy is going strong:

A. firms expand their operations.
B. demand for workers decreases.
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C. GDP growth is negative.
D. firms tend to lay off workers.
78. When the economy slows down the:

79. When the economy slows down:

A. firms contract their operations.
C. GDP growth is slowing or negative.
80. Cyclical unemployment is:

A. unemployment caused by short-term economic fluctuations reflected in GDP growth.
B. unemployment resulting from a mismatch between the skills workers can offer and the skills
demanded.
C. unemployment caused by workers who are changing their location, job, or career.
D. the effect of wages remaining persistently above the market-clearing level.
81. An economic slow-down would cause the labor:

A. demand curve to shift left.
B. demand curve to shift right.
C. supply curve to shift left.
D. supply curve to shift right.
82. If GDP growth were to increase, it would cause the labor:

83. An economic slow-down predicts the new equilibrium wage would be:
A. lower because the labor demand curve shifts left.
B. higher because the labor demand curve shifts left.
C. lower because the labor demand curve shifts right.
D. higher because the labor demand curve shifts right.
84. An economic boom predicts the new equilibrium wage would be:
85. We don't typically see wages __________ in response to an economic downturn because
____________.
A. rise; they are "sticky," and are slow to respond to shifts in the economy
B. rise; they cannot rise above the equilibrium in any circumstance
C. fall; they are "sticky" and are slow to respond to shifts in the economy
D. fall; they cannot fall below where they were previously set due to inflation
86. We don't typically see wages __________ in response to an economic upswing because
____________.
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C. fall; they are "sticky," and are slow to respond to shifts in the economy
87. The degree of wage stickiness in the real world:

A. is controversial, even among economists.
B. is agreed upon by economists, but not accepted by others, like policymakers.
C. is agreed upon by economists as a concept, but controversial in how it's measured.
D. has been estimated by economists.
88. When economists say wages are "sticky," they mean that they:
A. are slow to adjust to changes in the economy, and can cause unemployment.
B. stick to current market trends, and adjust to equilibrium when changes in the economy occur.
C. get stuck behind current market trends, and follow a typical two-week lag with changes in the
economy.
D. lead market trends, and other variables will stick to the wage rate and follow it closely.
89. Wages tend to be "sticky" because:

A. contracts are often negotiated for long terms and cannot be easily changed.
B. workers are less likely to work as hard if their pay may be cut due to market performance and not their
performance.
C. constantly changing wages creates uncertainty and costs the employer a lot of time and energy to
change wage rates.
D. All of these are possible reasons why wages might be sticky.
90. Which of the following is not the result of wage stickiness in an economic downturn?
A. Actual wages are temporarily above the market-clearing level.
B. Cyclical unemployment.
C. A surplus of labor.
D. A shortage of labor.
91. When the economy swings back toward the boom part of a business cycle which of the following will
generally not occur?
A. Labor demand will increase.
B. Cyclical unemployment will decrease.
C. Actual wages will approach the market-clearing level.
D. Labor supply will decrease.
92. Unemployment is a:
A. leading indicator, because the business cycle follows it.
B. lagging indicator, because the business cycle follows it.
C. leading indicator, because it follows the business cycle.
D. lagging indicator, because it follows the business cycle.
93. When growth goes down, unemployment tends to go:

A. up shortly after, and vice versa.
B. down shortly after, and vice versa.
C. down at the same time, and vice versa.
D. up at the same time, but remains sticky on the way down and lags behind.
94. Unemployment is a lagging indicator because:

A. employers wait to see how bad a recession looks before making the difficult decision to lay off workers.
B. employers wait to see how solid a recovery looks before committing to take on new employees.
C. firms may first try to decrease or increase the hours of existing employees before changing levels of
employment.
D. All of these are reasons that make unemployment a lagging indicator.
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95. With what measure does cyclical unemployment tend to move?
A. Per capita GDP growth rate
B. Nominal GDP
C. Inflation
D. GDP deflator
96. A minimum wage is the:

A. lowest wage that a firm is legally allowed to pay its workers.
B. highest wage that a firm is legally obligated to pay its non-skilled labor.
C. wage every high school dropout will earn if they are employed.
D. prevailing wage for low-income workers in a nation.
97. In the United States, the federal minimum wage in early 2016was:
A. $7.25 per hour.
B. $6.50 per hour.
C. $8.00 per hour.
D. $7.73 per hour.
98. Supporters of minimum-wage legislation argue that:

A. workers deserve a basic standard of living.
B. it would not be fair for firms to pay a wage that would leave workers struggling to escape poverty.
C. a worker earning minimum wage should be able to live above the poverty line.

B. it should be set below the market equilibrium wage.
C. some workers will become unemployed as a result of the minimum wage.
100. Those who oppose minimum wage legislation argue that:

A. setting a wage above the market-clearing equilibrium creates unemployment.
B. it should be set below the market-clearing equilibrium.
C. workers deserve a basic standard of living.
D. the way to get an efficient labor market is for government intervention.
101. Why don't wages fall so that everyone with the skills and desire gets a job?
A. The government might prevent it, through minimum-wage legislation.
B. Labor unions might prevent it, through bargaining backed by the threat to strike.
C. Firms themselves might prevent it, by voluntarily choosing to pay higher wages than necessary.
D. All of these are reasons why wages may not fall to equilibrium.
102. If the minimum wage is set at a level below the equilibrium wage it:
A. will have a large effect.
B. would be a nonbinding minimum wage.
C. would interfere with the market reaching equilibrium.
D. will probably affect government jobs more than any other job market.
103. If the minimum wage is set at a level above the equilibrium wage:
A. it will have no effect.
B. it will be a nonbinding minimum wage.
C. it could cause unemployment.
104. Some economists argue that the minimum wage:

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A. drives some labor to occur "under the table."
B. causes some employers to hire undocumented migrants driving up wages overall.
C. leads some employers to pay workers cash and then report these payments to the government.
105. If minimum wage legislation does cause unemployment, then:

A. those who are lucky enough to land jobs benefit.
B. those who become unemployed as a result lose.
C. firms will not bear the entire burden of the higher cost of employment.
106. If minimum wage legislation does not cause unemployment, then:

A. those who work for minimum wage will benefit.
B. firms will generally gain by earning higher profits.
C. minimum wages may still be binding for many employees.
D. most likely the government won’t study how minimum wage legislation may affect employment.
107. Labor unions are groups of:

A. employees who join together to bargain with their employer(s) over salaries and work conditions.
B. employers who join together to create fair employment packages for employees within a certain
geographical area.
C. employers who petition the government to regulate the safety conditions of certain industries.
D. employees who petition the government to oversee the employment conditions of employees who
work for major corporations.
108. In the 1950s, about _________ of U.S. workers were in unions.

A. 1/3
B. 1/2
C. 1/4
D. 3/4
109. The number of U.S. workers in unions today is:

A. roughly equivalent to what it was in the 1950s.
B. about 13%of all wage and salary workers.
C. just under 15 million Americans.
D. not something we can estimate due to the lack of information on all people in the labor market.

A. higher than it was in the 1950s.
B. about 21 %of all wage and salary workers.
111. The employer who has the most unionized workers is the:
A. government.
B. airline industry.
C. trucking industry.
D. auto industry.
112. The biggest benefit to members of a union is:

A. being able to bargain as a group.
B. keeping non-union workers out of their industry.
C. negotiating minimum wage legislation.
D. getting raises without having to do any work.
113. What does the existence of labor unions mean for the labor market and for unemployment?
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A. Wage rates could rise above equilibrium level.
B. Wage rates could fall below equilibrium level.
C. Unemployment could reach zero.
D. Unemployment could grow to unsustainable levels.
114. There is evidence that the presence of unions in a labor market:

A. can push wages up for non-union wage earners in the same market.
B. can keep wages low for non-union wage earners in the same market.
C. has no effect on the wages of non-union wage earners in the same market.
D. has an identical effect on the wages of union and non-union wage earners in the same market.
115. The role of unions is:

A. unnecessary if the market does a good job of determining fair wages.
B. to provide firms with a mechanism to more efficiently fire less productive workers.
C. gaining power in the United States.
D. All of these statements are true.
116. Efficiency wages are:

A. wages deliberately set above the market rate in order to increase productivity.
B. not a cause of unemployment.
C. generally a disincentive for an employee to work hard to try to keep their job.
117. Employers choose to offer efficiency wages because:

A. they give employees an incentive to work hard to keep their jobs.
B. it will reduce turnover, saving the employer time and money to hire and train new workers.
C. it has proven to make workers more productive.
118. It is generally more profitable for a firm to pay workers more than the going wage rate:
A. in sectors where skills are scarce.
B. in industries in which worker motivation doesn’t really matter.
C. in areas in which turnover is not very costly.
119. One reason Henry Ford is famous was for instituting:

A. assembly lines in an effort to reduce worker turnover.
B. efficiency wages in an effort to reduce worker absenteeism.
C. minimum wages in an effort to increase productivity.
D. unemployment benefits in response to the first unionized workers.
120. The amount of unemployment caused by efficiency wages:

A. has been measured by economists to be minimal.
B. has been found to be quite large in markets that have mostly minimum-wage workers.
C. is larger in sectors that have more less-skilled workers in them.
D. has little conclusive evidence in economic research.
121. Unemployment insurance is:

A. money that is paid by the government to people who are unemployed.
B. money that is paid to the government by employers who lay off employees.
C. offered by the government as a way to affect the level of cyclical unemployment.
D. offered by the government as a way to affect the level of seasonal unemployment.

A. offered by companies as a way to affect the level of frictional unemployment.
B. offered by the government as a way to affect the level of seasonal unemployment.
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C. money that is paid by the government to people who are unemployed.
123. Unemployment insurance:

A. is an explanation for why wages do not reach equilibrium.
B. can affect how quickly people find jobs.
C. will not affect the natural rate of unemployment.
D. is a mandated federal policy all states must adhere to.
124. Unemployment insurance could affect unemployment by:

A. increasing the equilibrium level of unemployment.
B. decreasing the amount of frictional unemployment.
C. changing the incentives of those unemployed and looking for work.
125. Giving people income through unemployment insurance:

A. allows people to prolong their unemployment until they find a better match.
B. reduces seasonal employment because people find good matches, and change jobs less often.
C. creates one effect positive on unemployment.

A. varies widely across countries.
B. has a set minimum in the US.
C. is typically 32 weeks in the US, except for times of unusually high unemployment.

A. is offered in all countries.
B. varies widely across countries.
C. is most generous in the United States.
D. has a set minimum in the United States, with some states being more generous.
128. We would expect, all else equal, that:

A. lower taxes would reduce unemployment.
B. higher taxes would reduce unemployment.
C. taxes would have no effect on unemployment.
D. taxes would be negatively related to unemployment.
129. Economists believe that lower taxes should reduce unemployment because:
A. people have more incentive to find a job, knowing they will keep more of the income they earn from the
job when taxes are low.
B. people will not want to miss out on the opportunity to keep more of the income they earn when taxes
are lower, so they will have an incentive to keep their job and not quit.
C. people have more incentive to be productive if the money they earn is not being taxed as much when
taxes are low.
130. The magnitude of the impact taxes have on job-search effort is:
A. inconclusive.
B. hugely negative.
C. slightly positive.
D. slightly negative.
131. We would expect that policies to protect workers would:

A. lead to greater unemployment.
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B. lead to less unemployment.
C. have no impact on unemployment.
D. affect those seasonally unemployed more profoundly than other unemployed workers.
132. Which of the following is not an example of an economic policy that affects the level of
unemployment?
A. Minimum wage law.
B. Efficiency wages.
C. At-will employment policies.
D. Title IX.
133. Policies that make it more difficult to fire an employee are likely to:
D. affect frictionally unemployed workers more than other unemployed workers.
134. Policies that make it more difficult to fire an employee likely lead to:
A. greater unemployment, because employers will be more hesitant to hire someone.
B. greater unemployment, because employees will quit more often.
C. less unemployment, because everyone will value their job more.
D. less unemployment, because employers will not be able to fire as many people.
135. The trade-offs in the effect of unemployment insurance are:

A. it prolongs the job search, but reduces the number of job searches a person has to make.
B. it shortens the job search, but lengthens the number of times a person will switch careers.
C. it is free money and makes people lazy, but without it people would starve.
D. it reduces incentive to accept a job, but reduces the number of job offers typically made.
Chapter 09 Test Bank KEY

1. During periods of recession unemployment:
A. is more common.
B. is less common.
C. is uncorrelated to periods of recession.
D. rates are the same for all groups of the working population.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 09-01 Explain how economists measure employment and unemployment.
Topic: Unemployment
2. Unemployment rates tend to be highest during periods of:

A. recession.
B. economic boom.
C. recovery.
D. static movement.
Blooms: Understand
9-16
Topic: Unemployment
3. We may note that unemployment:

A. exists at any time during the business cycle.
B. only occurs during times of recession.
C. is highest during times of economic booms.
D. tends to increase during times of economic recovery.
Blooms: Understand
Topic: Unemployment
4. Policies designed to protect workers:

A. include minimum wage laws.
B. include unionization laws.
C. can lead to unemployment.
Blooms: Understand
Topic: Unemployment
5. One consequence of unemployment is that:

A. some productive potential of the economy is being wasted.
B. the time and skills of the unemployed are not being put to use.
C. it can create uncertainty about the future.
D. All of these are consequences of unemployment.
Blooms: Understand
Topic: Unemployment
6. Unemployment:
A. changes primarily because of macroeconomic forces.
B. can have serious social consequences.
C. can create uncertainty about the future.
Blooms: Understand
Topic: Unemployment
7. Unemployment occurs when someone:

A. wants to work but cannot find a job.
B. is not working full-time.
C. should be working but chooses not to.
D. has useful skills that are not being used.
Blooms: Understand
Topic: Unemployment
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8. The government office in charge of collecting official employment statistics is the:
A. Bureau of Labor Statistics.
B. Bureau of Economic Analysis.
C. Bureau of Industry and Security.
D. Bureau of the Census.
Blooms: Understand
Topic: Unemployment
9. In the United States, the working-age population refers to the:

A. civilian, noninstitutional population aged 16 and over.
B. population of those aged 16 and over.
C. civilian, noninstitutional population of those between age 16 and age 64.
D. noninstitutional population of those between ages 16 and 64.
Blooms: Understand
Topic: Unemployment
10. For economic purposes in the United States, the working-age population does not include:
A. anyone in the military.
B. someone who is 16 and does not want to work.
C. someone who is 65.
D. anyone without a driver’s license.
Blooms: Understand
Topic: Unemployment
11. For economic purposes in the United States, the working-age population does include people:
A. in prison.
B. in the military.
C. less than 16 years old.
D. over the age of 16.
Blooms: Understand
Topic: Unemployment
12. In the United States, to count as unemployed, you must:

A. be younger than 65 years old.
B. actively looking for work.
C. be skilled enough to hold a job.
Blooms: Understand
Topic: Unemployment
13. The labor force excludes those:

A. younger than age 16 years old.
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B. who don't want to work.
C. who are disabled and can't work.
D. The labor force excludes all of these.
Blooms: Understand
Topic: Unemployment
14. The labor force does not include people in the working-age population who are:
A. employed.
B. not actively trying to find a job.
C. retired, a full-time student, or stay-at-home parent.
D. employed part time.
Blooms: Understand
Topic: Unemployment
15. The unemployment rate:

A. is measured by the number of people who are unemployed divided by the labor force.
B. is never zero.
C. measures what percentage of our labor force is currently looking for a job and can't find one.
Blooms: Understand
Topic: Unemployment

A. what percentage of the labor force wants to work and can't find a job.
B. who is currently unemployed.
C. why the unemployed can't find work.
D. the number of people who really don’t want to work.
Blooms: Understand
Topic: Unemployment

A. what percentage of the labor force want to work and can't find a job.
B. who is being affected by the fluctuations of the economy.
C. how to solve the problem of unemployment.
D. what portion of the population is causing the economy to languish.
Blooms: Understand
Topic: Unemployment
18. In general, the unemployment rate does not vary greatly by:
A. educational status.
B. gender.
C. age.
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D. height
Blooms: Understand
Topic: Unemployment
19. On average, younger people have:

A. higher unemployment rates than older people.
B. lower unemployment rates than older people.
C. similar unemployment rates than older people.
D. uncorrelated unemployment rates compared to those of older people.
Blooms: Understand
Topic: Unemployment
20. People with less education are:

A. more likely to be unemployed than people with more education.
B. less likely to be unemployed than people with more education.
C. just as likely to be unemployed than people with more education.
D. not comparable to people with more education.
Blooms: Understand
Topic: Unemployment

A. is measured by the labor force divided by the total population.
B. tells us what fraction of the working-age population wants to be working.
C. typically rises during periods of recession.
D. is measured by those employed divided by the working-age population.
Blooms: Understand
Topic: Unemployment
22. Economists report changes in unemployment in:

A. percentage points, not percentages.
B. percentages, not percentage points.
C. percentage points or percentages, interchangeably.
D. nominal figures; they rarely use percentages or percentage point changes.
Blooms: Understand
Topic: Unemployment

A. tells us what fraction of the working-age population wants to be working, whether or not they actually
have a job.
B. typically rises during times of recession, as more people need work.
C. is used as an indication of the health of the overall economy.
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Blooms: Understand
Topic: Unemployment
24. During times of recession, the labor force participation rate typically:
A. rises, as more people need work.
B. rises, as more incomes per household are needed to make ends meet.
C. falls, as more people give up and stop looking for work.
D. falls, as more people cannot find work, they stay in jobs that aren't a good fit.
Blooms: Understand
Topic: Unemployment
25. Some people drop out of the labor force during times of recession:
A. to go back to college, because the opportunity cost is lower during a recession.
B. because they cannot find work and give up trying.
C. and decide to take early retirement.
Blooms: Understand
Topic: Unemployment
26. In 2015, the labor force participation rate was 62.6 percent. This means that:
A. 62.6 % of all working age people wanted a job.
B. there was 37.4 % unemployment.
C. 62.6 % of all working age people were employed.
D. only 62.4 percent of labor force was in working age population.
Blooms: Understand
Topic: Unemployment
27. The unemployment rate may:

A. understate the effect of a recession on employment because some leave the labor force.
B. understate the effect of a recession on employment because many enter the labor force.
C. overstate the effect of a recession on employment because some leave the labor force.
D. overstate the effect of a recession on employment because many enter the labor force.
Blooms: Understand
Topic: Unemployment
28. If you hear that unemployment increased in the last year by 3.5 percentage points to 8 %it means:
A. 35 out of every 100 people lost their job in the last year.
B. 35 out of every 1,000 people lost their job in the last year.
C. 8 out of every 1,000 people who want a job can't find one.
D. 80 out of every 100 people who want a job can't find one.
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Blooms: Understand
Topic: Unemployment
29. If you hear that unemployment decreased by 2 percentage points to 6 %in the past year, while the
labor force participation rate remained constant, it means:
A. on a net basis, 2 out of every 10 people lost their job in the last year.
B. on a net basis, 20 out of every 1,000 unemployed persons found a job in the last year.
C. on a net basis, 2 out of every 100 people lost their job in the past year.
D. on a net basis, 4 out of every 100 unemployed persons found a job in the last year.
Blooms: Understand
Topic: Unemployment
30. If you hear that unemployment increased by 2 percentage points to 4 %in the past year, while the
labor force participation rate and the population remained constant, it means:
A. unemployment doubled in the past year.
B. there was a 100 percent increase in unemployment.
C. twice as many people are without work than was the case a year ago.
Blooms: Understand
Topic: Unemployment
31. Discouraged workers are people who have:

A. looked for work in the past year but have given up looking because of the condition of the labor
market.
B. not looked for work in the past year but would take a job if one was offered to them.
C. looked for work in the past year but decided to leave the labor market to go back to school, retire, or be
a stay-at-home parent.
D. not looked for work in over a year because of the condition of the labor market.
Blooms: Understand
Topic: Unemployment
32. Someone who is underemployed is someone who:

A. is working part-time, but wants full-time employment.
B. is working in a job for which he is overqualified.
C. could be contributing more output to society by either working more, or by working using more
advanced skills he possesses but doesn't currently use.
D. All of these describe someone who is underemployed.
Blooms: Understand
Topic: Unemployment
33. Matt is a college graduate who majored in creative writing and currently works at a local bookstore as
a sales clerk. The best way to describe Matt is to say he is:
A. unemployed.
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B. a discouraged worker.
C. underemployed.
D. overemployed.
Blooms: Understand
Topic: Unemployment
34. Jen has a PhD in economics and has been working for 3 years part-time as an instructor; she has
always hoped to be hired as a full-time faculty member. The best way to describe Jen is to say she is:
B. unemployed.
C. underemployed.
D. overemployed.
Blooms: Understand
Topic: Unemployment
35. Marc is a high school graduate and currently works as a corrections officer at a local prison. He would
like to go back to school to train to become a police officer someday. The best way to describe Marc is to
say he is:
B. unemployed.
C. underemployed.
D. employed.
Blooms: Understand
Topic: Unemployment
36. John earned a PhD in biomedical engineering, and works full-time as a faculty member at the local
university. He also does some private consulting work on the side. He would like to give up teaching and
do consulting full-time, but he fears there isn't enough demand for it. The best way to describe John is to
say he is:
B. underemployed.
C. overemployed.
D. employed.
Blooms: Understand
Topic: Unemployment
37. Sonia has a BAin art history, and is currently working full-time as a waitress. The Bureau of Labor
Statistics would count Sonia as:
A. employed.
B. underemployed.
C. unemployed.
D. a discouraged worker.
Blooms: Understand
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Topic: Unemployment
38. Sasha has a master's degree in writing, and currently works full-time as a 2nd grade classroom helper.
She submits articles for the local paper on occasion, and gets paid only when the editor agrees to publish
a submission. Sasha would love to be a full-time reporter. The best way to describe Sasha is to say she is
________________; the Bureau of Labor Statistics would count Sasha as ____________.
A. underemployed; employed
B. employed; employed
C. discouraged; underemployed
D. underemployed; underemployed
Blooms: Understand
Topic: Unemployment
39. The Bureau of Labor Statistics counts underemployed persons as those who are currently working:
A. less than they would like to be.
B. in a job for which they are overqualified for.
C. less hours than their employer requires full-time workers to work.
D. in a field that doesn’t add a lot to overall GDP.
Blooms: Understand
Topic: Unemployment
40. The Bureau of Labor Statistics collects _______ measures of unemployment.

A. 4
B. 5
C. 6
D. 7
Blooms: Understand
Topic: Unemployment
41. The Bureau of Labor Statistics measures unemployment by surveying:

A. every household at least once a year.
B. a sample of about 60,000 households every month.
C. a sample of about 60,000 employers every month.
D. every business at least once a year.
Blooms: Understand
Topic: Unemployment
42. The survey the Bureau of Labor Statistics uses to collect unemployment data is called the:
A. current population survey.
B. census population survey.
C. census employment survey.
D. current employment survey.
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Blooms: Understand
Topic: Unemployment

A. shows the relationship between the total quantity of labor demanded by all the firms in the economy
and the wage rate.
B. shows that, all things being equal, firms will want to hire more labor when wages are lower and less
labor when wages are higher.
Blooms: Understand
Learning Objective: 09-02 Explain how wage rates above equilibrium cause unemployment.
Topic: Labor Supply and Labor Demand

A. is provided by firms who want to hire workers at each given wage.
C. shows number of workers who are willing and able to work at higher wages.
D. shows that the number of people who want to work increases as the wage increases.
Blooms: Understand

A. is made up of firms who want to hire workers at each given wage.
C. shows number of firms who are willing and able to hire workers at each given wage.
D. shows that the number of firms who want to hire workers decreases as the wage increases.
Blooms: Understand

A. shows the relationship between the total quantity of labor supplied by all firmsin the economy and the
wage rate.
B. shows that, all things being equal, more workers will want to work when wages are higher and less will
want to work when wages are lower.
Blooms: Understand
47. If we wanted to describe unemployment in terms of supply and demand, we could say:
A. there is a surplus of labor.
B. at the prevailing wage, the demand is greater than the supply of labor.
C. the quantity of those demanding labor is greater than those supplying labor.
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Blooms: Understand
48. The equilibrium price of labor is called:

A. the wage.
B. income, plus benefits.
C. opportunity cost.
D. the leisure trade-off.
Blooms: Understand
49. When the prevailing market wage is above equilibrium, we say:

A. there is no unemployment.
B. there is a surplus of labor.
C. the quantity of labor demanded is more than the quantity supplied.
Blooms: Understand
50. When the prevailing market wage is above equilibrium:

A. the surplus of labor is the amount of unemployment in the market.
B. the difference between the quantity supplied and the quantity of labor demanded is unemployment.
C. unemployment occurs.
Blooms: Understand
51. The normal level of unemployment that persists in an economy in the long run is:
A. called the natural rate of unemployment.
B. also called the equilibrium rate of underemployment.
C. zero when the market is equilibrium.
D. always achieved in the real world.
Blooms: Understand
Learning Objective: 09-03 Explain why there is a natural rate of unemployment in an economy.
Topic: Natural Rate of Unemployment
52. The natural rate of unemployment:

A. is typically zero.
B. is the normal level of unemployment in an economy in the long run.
C. is constant over time.
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Blooms: Understand
53. Which type of unemployment leads to a natural rate of unemployment above zero?
A. The natural rate of unemployment is always zero.
B. Frictional unemployment
C. Unemployment of government workers
Blooms: Understand
54. Which type of unemployment does not contribute to the natural rate of unemployment?
A. Frictional
B. Structural
C. Real-wage
D. Cyclical
Blooms: Understand
55. Which type of unemployment contributes to the natural rate of unemployment?

A. Real-wage unemployment
B. Cyclical unemployment
C. Unemployment of government workers.
D. All of these contribute to the natural rate.
Blooms: Understand
56. Frictional unemployment is:

D. the most alarming cause of unemployment.
Blooms: Understand
57. Structural unemployment is:

D. when workers voluntarily quit their jobs.
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Blooms: Understand
58. Real-wage unemployment is:

D. also called cyclical unemployment.
Blooms: Understand
59. Johnny has been working in a sandwich shop full-time while he attends college. When he graduates,
he quits the sandwich shop and begins to search for full-time employment related to his college degree.
Johnny would be considered:
Blooms: Understand
60. Jake just quit his job as a shoe salesman and is looking for work as an accountant, which is what his
college degree is in. Jake would be considered:
B. structurally unemployed
D. Jake is not in the labor force.
Blooms: Understand
61. Sue just quit her job as a librarian to pursue her lifelong dream of getting a job as a teacher. Sue
C. seasonally unemployed.
D. Sue is not in the labor force.
Blooms: Understand
62. Bob just graduated from college and has just landed his first job with a local accounting firm that will
start in three months. Bob plans to use that time to find a place to live, and adjust to the new area. Bob
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B. employed.
D. Bob is not in the labor force.
Blooms: Understand
63. Carol is a coal miner who just got laid off when the last coal mine in the area was shut down. She has
looked everywhere for another job as a miner, but cannot find one. Given that Carol is unlikely to find
another job as a miner, she would be considered:
D. Carol is a discouraged worker.
Blooms: Understand
64. Sonia was a great bookkeeper 20 years ago, then left the workforce to stay home and raise her
children. Now that they're in college, Sonia looks for another bookkeeping job, but they all require
computer skills that she doesn't have. Sonia would be considered:
C. Sonia is not in the labor force..
D. seasonally unemployed.
Blooms: Understand
65. Don worked as a machinist all his life, and was recently laid off because his plant closed and the jobs
were outsourced to India. There don't seem to be any machinist jobs in the area anymore. Don would be
considered:
D. Don is a discouraged worker.
Blooms: Understand
66. Sarah used to be a music teacher at a local school, but got let go last year due to budget cuts. Sarah
now works part-time as a waitress while looking for another teaching job. Sarah would be considered:
B. underemployed.
D. real-wage unemployed.
Blooms: Understand
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67. Fred was working as a sales rep for a firm, and just completed an MBA by taking courses at night.
Fred quits his job to pursue a management position. Fred would be considered:
A. underemployed.
B. frictionally unemployed.
Blooms: Understand
A. provide information to unemployed people about which professions are experiencing rising demand for
labor.
B. subsidize retraining programs for unemployed workers to learn new skills.
C. offer low-interest loans to unemployed workers to go back to school to learn new skills.
D. All of these are ways the government can deal with structural unemployment.
Blooms: Understand
A. subsidize retraining programs.
B. increase unemployment benefits.
C. mandate employers cannot fire anyone.
D. All of these are ways that would minimize the effects of structural unemployment.
Blooms: Understand
70. When governments provide information to unemployed people about which professions are
experiencing rising demand for labor, they are trying to minimize the effects of which kind of
unemployment?
A. Frictional unemployment
B. Structural unemployment
C. Seasonal unemployment
Blooms: Understand
71. When governments subsidize retraining programs for unemployed workers to learn new skills, they
are trying to minimize the effects of which kind of unemployment?
A. Frictional
B. Structural
C. Seasonal
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D. Real-wage
Blooms: Understand
72. Real-wage unemployment can be caused by which of the following?

B. Retraining programs
C. Low-interest student loans
D. None of these cause real-wage unemployment.
Blooms: Understand
73. Classical unemployment can be caused by which of the following?

B. Bargaining by unions
C. Efficiency wages
D. All these create classical unemployment.
Blooms: Understand
74. When the economy goes through ups and downs over time:
A. it is not reflected by changes in GDP growth.
B. economists call this pattern the business cycle.
C. it affects the supply of labor.
Blooms: Understand
Learning Objective: 09-04 Explain why there is a cyclical component of unemployment.
Topic: Cyclical Unemployment
75. The business cycle matters for unemployment because:

A. it affects the demand for labor.
B. it affects the supply of labor.
C. Both of these are true.
D. Neither of these is true.
Blooms: Understand
76. When the economy is going strong the:

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Blooms: Understand
77. When the economy is going strong:

A. firms expand their operations.
C. GDP growth is negative.
D. firms tend to lay off workers.
Blooms: Understand
78. When the economy slows down the:

Blooms: Understand
79. When the economy slows down:

A. firms contract their operations.
C. GDP growth is slowing or negative.
Blooms: Understand
80. Cyclical unemployment is:

A. unemployment caused by short-term economic fluctuations reflected in GDP growth.
B. unemployment resulting from a mismatch between the skills workers can offer and the skills
demanded.
C. unemployment caused by workers who are changing their location, job, or career.
D. the effect of wages remaining persistently above the market-clearing level.
Blooms: Understand
81. An economic slow-down would cause the labor:

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Blooms: Understand
82. If GDP growth were to increase, it would cause the labor:

Blooms: Understand
83. An economic slow-down predicts the new equilibrium wage would be:
Blooms: Understand
84. An economic boom predicts the new equilibrium wage would be:
Blooms: Understand
85. We don't typically see wages __________ in response to an economic downturn because
____________.
C. fall; they are "sticky" and are slow to respond to shifts in the economy
Blooms: Understand
86. We don't typically see wages __________ in response to an economic upswing because
____________.
C. fall; they are "sticky," and are slow to respond to shifts in the economy
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Blooms: Understand
87. The degree of wage stickiness in the real world:

A. is controversial, even among economists.
B. is agreed upon by economists, but not accepted by others, like policymakers.
C. is agreed upon by economists as a concept, but controversial in how it's measured.
D. has been estimated by economists.
Blooms: Understand
88. When economists say wages are "sticky," they mean that they:
A. are slow to adjust to changes in the economy, and can cause unemployment.
B. stick to current market trends, and adjust to equilibrium when changes in the economy occur.
C. get stuck behind current market trends, and follow a typical two-week lag with changes in the
economy.
D. lead market trends, and other variables will stick to the wage rate and follow it closely.
Blooms: Understand
89. Wages tend to be "sticky" because:

A. contracts are often negotiated for long terms and cannot be easily changed.
B. workers are less likely to work as hard if their pay may be cut due to market performance and not their
performance.
C. constantly changing wages creates uncertainty and costs the employer a lot of time and energy to
change wage rates.
D. All of these are possible reasons why wages might be sticky.
Blooms: Understand
90. Which of the following is not the result of wage stickiness in an economic downturn?
A. Actual wages are temporarily above the market-clearing level.
B. Cyclical unemployment.
C. A surplus of labor.
D. A shortage of labor.
Blooms: Understand
91. When the economy swings back toward the boom part of a business cycle which of the following will
generally not occur?
A. Labor demand will increase.
B. Cyclical unemployment will decrease.
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C. Actual wages will approach the market-clearing level.
D. Labor supply will decrease.
Blooms: Understand
92. Unemployment is a:
A. leading indicator, because the business cycle follows it.
B. lagging indicator, because the business cycle follows it.
C. leading indicator, because it follows the business cycle.
D. lagging indicator, because it follows the business cycle.
Blooms: Understand
93. When growth goes down, unemployment tends to go:

A. up shortly after, and vice versa.
B. down shortly after, and vice versa.
C. down at the same time, and vice versa.
D. up at the same time, but remains sticky on the way down and lags behind.
Blooms: Understand
94. Unemployment is a lagging indicator because:

A. employers wait to see how bad a recession looks before making the difficult decision to lay off workers.
B. employers wait to see how solid a recovery looks before committing to take on new employees.
C. firms may first try to decrease or increase the hours of existing employees before changing levels of
employment.
D. All of these are reasons that make unemployment a lagging indicator.
Blooms: Understand
95. With what measure does cyclical unemployment tend to move?

A. Per capita GDP growth rate
B. Nominal GDP
C. Inflation
D. GDP deflator
Blooms: Understand
96. A minimum wage is the:

A. lowest wage that a firm is legally allowed to pay its workers.
B. highest wage that a firm is legally obligated to pay its non-skilled labor.
C. wage every high school dropout will earn if they are employed.
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D. prevailing wage for low-income workers in a nation.
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 09-05 Identify factors that may stop wages from falling to the equilibrium level.
Topic: Minimum Wages
97. In the United States, the federal minimum wage in early 2016was:
A. $7.25 per hour.
B. $6.50 per hour.
C. $8.00 per hour.
D. $7.73 per hour.
Blooms: Remember
Difficulty: 1 Easy

B. it would not be fair for firms to pay a wage that would leave workersstruggling to escape poverty.
C. a worker earning minimum wage should be able to live above the poverty line.
Blooms: Remember
Difficulty: 1 Easy

B. it should be set below the market equilibrium wage.
C. some workers will become unemployed as a result of the minimum wage.
Blooms: Remember
Difficulty: 1 Easy
100. Those who oppose minimum wage legislation argue that:

A. setting a wage above the market-clearing equilibrium creates unemployment.
B. it should be set below the market-clearing equilibrium.
C. workers deserve a basic standard of living.
D. the way to get an efficient labor market is for government intervention.
Blooms: Remember
Difficulty: 1 Easy
101. Why don't wages fall so that everyone with the skills and desire gets a job?
A. The government might prevent it, through minimum-wage legislation.
B. Labor unions might prevent it, through bargaining backed by the threat to strike.
C. Firms themselves might prevent it, by voluntarily choosing to pay higher wages than necessary.
D. All of these are reasons why wages may not fall to equilibrium.
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Blooms: Remember
Difficulty: 1 Easy
Topic: Preventing Wages from Falling
102. If the minimum wage is set at a level below the equilibrium wage it:
A. will have a large effect.
B. would be a nonbinding minimum wage.
C. would interfere with the market reaching equilibrium.
D. will probably affect government jobs more than any other job market.
Blooms: Remember
Difficulty: 1 Easy
103. If the minimum wage is set at a level above the equilibrium wage:
A. it will have no effect.
B. it will be a nonbinding minimum wage.
C. it could cause unemployment.
Blooms: Remember
Difficulty: 1 Easy
104. Some economists argue that the minimum wage:

A. drives some labor to occur "under the table."
B. causes some employers to hire undocumented migrants driving up wages overall.
C. leads some employers to pay workers cash and then report these payments to the government.
Blooms: Remember
Difficulty: 1 Easy
105. If minimum wage legislation does cause unemployment, then:

A. those who are lucky enough to land jobs benefit.
B. those who become unemployed as a result lose.
C. firms will not bear the entire burden of the higher cost of employment.
Blooms: Remember
Difficulty: 1 Easy
106. If minimum wage legislation does not cause unemployment, then:

A. those who work for minimum wage will benefit.
B. firms will generally gain by earning higher profits.
C. minimum wages may still be binding for many employees.
D. most likely the government won’t study how minimum wage legislation may affect employment.
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Blooms: Remember
Difficulty: 1 Easy
107. Labor unions are groups of:

A. employees who join together to bargain with their employer(s) over salaries and work conditions.
B. employers who join together to create fair employment packages for employees within a certain
geographical area.
C. employers who petition the government to regulate the safety conditions of certain industries.
D. employees who petition the government to oversee the employment conditions of employees who
work for major corporations.
Blooms: Remember
Difficulty: 1 Easy
Topic: Unions
108. In the 1950s, about _________ of U.S. workers were in unions.

A. 1/3
B. 1/2
C. 1/4
D. 3/4
Blooms: Remember
Difficulty: 1 Easy
Topic: Unions

A. roughly equivalent to what it was in the 1950s.
B. about 13%of all wage and salary workers.
D. not something we can estimate due to the lack of information on all people in the labor market.
Blooms: Remember
Difficulty: 1 Easy
Topic: Unions

A. higher than it was in the 1950s.
B. about 21 %of all wage and salary workers.
Blooms: Remember
Difficulty: 1 Easy
Topic: Unions
111. The employer who has the most unionized workers is the:
A. government.
B. airline industry.
C. trucking industry.
D. auto industry.
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Blooms: Remember
Difficulty: 1 Easy
Topic: Unions
112. The biggest benefit to members of a union is:

A. being able to bargain as a group.
B. keeping non-union workers out of their industry.
C. negotiating minimum wage legislation.
D. getting raises without having to do any work.
Blooms: Remember
Difficulty: 1 Easy
Topic: Unions
113. What does the existence of labor unions mean for the labor market and for unemployment?
A. Wage rates could rise above equilibrium level.
B. Wage rates could fall below equilibrium level.
C. Unemployment could reach zero.
D. Unemployment could grow to unsustainable levels.
Blooms: Remember
Difficulty: 1 Easy
Topic: Unions
114. There is evidence that the presence of unions in a labor market:

A. can push wages up for non-union wage earners in the same market.
B. can keep wages low for non-union wage earners in the same market.
C. has no effect on the wages of non-union wage earners in the same market.
D. has an identical effect on the wages of union and non-union wage earners in the same market.
Blooms: Remember
Difficulty: 1 Easy
Topic: Unions
115. The role of unions is:

A. unnecessary if the market does a good job of determining fair wages.
B. to provide firms with a mechanism to more efficiently fire less productive workers.
C. gaining power in the United States.
D. All of these statements are true.
Blooms: Remember
Difficulty: 1 Easy
Topic: Unions
116. Efficiency wages are:

A. wages deliberately set above the market rate in order to increase productivity.
B. not a cause of unemployment.
C. generally a disincentive for an employee to work hard to try to keep their job.
Blooms: Remember
Difficulty: 1 Easy
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Topic: Efficiency Wages
117. Employers choose to offer efficiency wages because:

A. they give employees an incentive to work hard to keep their jobs.
B. it will reduce turnover, saving the employer time and money to hire and train new workers.
C. it has proven to make workers more productive.
Blooms: Remember
Difficulty: 1 Easy
118. It is generally more profitable for a firm to pay workers more than the going wage rate:
A. in sectors where skills are scarce.
B. in industries in which worker motivation doesn’t really matter.
C. in areas in which turnover is not very costly.
Blooms: Remember
Difficulty: 1 Easy
119. One reason Henry Ford is famous was for instituting:

A. assembly lines in an effort to reduce worker turnover.
B. efficiency wages in an effort to reduce worker absenteeism.
C. minimum wages in an effort to increase productivity.
D. unemployment benefits in response to the first unionized workers.
Blooms: Remember
Difficulty: 1 Easy
120. The amount of unemployment caused by efficiency wages:

A. has been measured by economists to be minimal.
B. has been found to be quite large in markets that have mostly minimum-wage workers.
C. is larger in sectors that have more less-skilled workers in them.
D. has little conclusive evidence in economic research.
Blooms: Remember
Difficulty: 1 Easy

A. money that is paid by the government to people who are unemployed.
B. money that is paid to the government by employers who lay off employees.
C. offered by the government as a way to affect the level of cyclical unemployment.
D. offered by the government as a way to affect the level of seasonal unemployment.
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 09-06 Describe the challenges policy-makers face when designing unemployment insurance and understand how this and
related policies can affect rates of unemployment.
9-40
Topic: Unemployment Insurance and Other Policies

A. offered by companies as a way to affect the level of frictional unemployment.
B. offered by the government as a way to affect the level of seasonal unemployment.
C. money that is paid by the government to people who are unemployed.
Blooms: Understand

A. is an explanation for why wages do not reach equilibrium.
B. can affect how quickly people find jobs.
C. will not affect the natural rate of unemployment.
D. is a mandated federal policy all states must adhere to.
Blooms: Understand
124. Unemployment insurance could affect unemployment by:

A. increasing the equilibrium level of unemployment.
B. decreasing the amount of frictional unemployment.
C. changing the incentives of those unemployed and looking for work.
Blooms: Understand
125. Giving people income through unemployment insurance:

A. allows people to prolong their unemployment until they find a better match.
B. reduces seasonal employment because people find good matches, and change jobs less often.
C. creates one effect positive on unemployment.
Blooms: Understand

A. varies widely across countries.
B. has a set minimum in the US.
C. is typically 32 weeks in the US, except for times of unusually high unemployment.
Blooms: Understand
9-41

A. is offered in all countries.
B. varies widely across countries.
C. is most generous in the United States.
D. has a set minimum in the United States, with some states being more generous.
Blooms: Remember
Difficulty: 1 Easy
128. We would expect, all else equal, that:

A. lower taxes would reduce unemployment.
B. higher taxes would reduce unemployment.
C. taxes would have no effect on unemployment.
D. taxes would be negatively related to unemployment.
Blooms: Understand
129. Economists believe that lower taxes should reduce unemployment because:
A. people have more incentive to find a job, knowing they will keep more of the income they earn from the
job when taxes are low.
B. people will not want to miss out on the opportunity to keep more of the income they earn when taxes
are lower, so they will have an incentive to keep their job and not quit.
C. people have more incentive to be productive if the money they earn is not being taxed as much when
taxes are low.
Blooms: Understand
130. The magnitude of the impact taxes have on job-search effort is:
A. inconclusive.
B. hugely negative.
C. slightly positive.
D. slightly negative.
Blooms: Understand
131. We would expect that policies to protect workers would:

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D. affect those seasonally unemployed more profoundly than other unemployed workers.
Blooms: Understand
132. Which of the following is not an example of an economic policy that affects the level of
unemployment?
A. Minimum wage law.
B. Efficiency wages.
C. At-will employment policies.
D. Title IX.
Blooms: Understand
133. Policies that make it more difficult to fire an employee are likely to:
D. affect frictionally unemployed workers more than other unemployed workers.
Blooms: Understand
134. Policies that make it more difficult to fire an employee likely lead to:
A. greater unemployment, because employers will be more hesitant to hire someone.
B. greater unemployment, because employees will quit more often.
C. less unemployment, because everyone will value their job more.
D. less unemployment, because employers will not be able to fire as many people.
Blooms: Understand
135. The trade-offs in the effect of unemployment insurance are:

A. it prolongs the job search, but reduces the number of job searches a person has to make.
B. it shortens the job search, but lengthens the number of times a person will switch careers.
C. it is free money and makes people lazy, but without it people would starve.
D. it reduces incentive to accept a job, but reduces the number of job offers typically made.
Blooms: Understand
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Chapter 09 Test Bank Summary
# of Ques
Category
tions
AACSB: Reflective Thinking 135
Accessibility: Keyboard Navigation 135
Blooms: Remember 27
Blooms: Understand 108
Difficulty: 1 Easy 27
Difficulty: 2 Medium 108
Learning Objective: 09-
42
01 Explain how economists measure employment and unemployment.
8
02 Explain how wage rates above equilibrium cause unemployment.
23
03 Explain why there is a natural rate of unemployment in an economy.
Learning Objective: 09-04 Explain why there is a cyclical component of unemployment. 22
25
05 Identify factors that may stop wages from falling to the equilibrium level.
Learning Objective: 09-06 Describe the challenges policy-
makers face when designing unemployment insurance and understand how this and relat 15
ed policies can affect rates of unemployment.
Topic: Cyclical Unemployment 22
Topic: Efficiency Wages 5
Topic: Labor Supply and Labor Demand 8
Topic: Minimum Wages 10
Topic: Natural Rate of Unemployment 23
Topic: Preventing Wages from Falling 1
Topic: Unemployment 42
Topic: Unemployment Insurance and Other Policies 15
Topic: Unions 9
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Macroeconomics 2nd Edition Karlan Test Bank

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Macroeconomics 2nd Edition Karlan

1. During periods of recession unemployment:

2. Unemployment rates tend to be highest during periods of:

3. We may note that unemployment:

4. Policies designed to protect workers:

5. One consequence of unemployment is that:

7. Unemployment occurs when someone:

8. The government office in charge of collecting official employment statistics is the:

9. In the United States, the working-age population refers to the:

12. In the United States, to count as unemployed, you must:

13. The labor force excludes those:

15. The unemployment rate:

16. The unemployment rate tells us:

17. The unemployment rate tells us:

19. On average, younger people have:

20. People with less education are:

21. The labor force participation rate:

22. Economists report changes in unemployment in:

23. The labor force participation rate:

27. The unemployment rate may:

31. Discouraged workers are people who have:

32. Someone who is underemployed is someone who:

40. The Bureau of Labor Statistics collects _______ measures of unemployment.

41. The Bureau of Labor Statistics measures unemployment by surveying:

43. The labor demand curve:

44. The labor demand curve:

45. The labor supply curve:

46. The labor supply curve:

48. The equilibrium price of labor is called:

49. When the prevailing market wage is above equilibrium, we say:

50. When the prevailing market wage is above equilibrium:

52. The natural rate of unemployment:

55. Which type of unemployment contributes to the natural rate of unemployment?

56. Frictional unemployment is:

57. Structural unemployment is:

58. Real-wage unemployment is:

72. Real-wage unemployment can be caused by which of the following?

73. Classical unemployment can be caused by which of the following?

75. The business cycle matters for unemployment because:

76. When the economy is going strong the:

77. When the economy is going strong:

78. When the economy slows down the:

79. When the economy slows down:

80. Cyclical unemployment is:

81. An economic slow-down would cause the labor:

82. If GDP growth were to increase, it would cause the labor:

87. The degree of wage stickiness in the real world:

89. Wages tend to be "sticky" because:

93. When growth goes down, unemployment tends to go:

94. Unemployment is a lagging indicator because:

96. A minimum wage is the:

98. Supporters of minimum-wage legislation argue that:

99. Supporters of minimum-wage legislation argue that:

100. Those who oppose minimum wage legislation argue that:

104. Some economists argue that the minimum wage:

105. If minimum wage legislation does cause unemployment, then:

106. If minimum wage legislation does not cause unemployment, then:

107. Labor unions are groups of:

108. In the 1950s, about _________ of U.S. workers were in unions.

109. The number of U.S. workers in unions today is:

110. The number of U.S. workers in unions today is:

112. The biggest benefit to members of a union is:

114. There is evidence that the presence of unions in a labor market:

115. The role of unions is: