Name: ______Business Cycles/Unemployment Review
1. / The labor force is equal to the:A) / sum of employment and unemployment.
B) / population minus the number of employed.
C) / sum of the employed and the underemployed.
D) / number of people working in the economy.
2. / To be classified as unemployed, a person must be:
A) / not working.
B) / not working and actively looking for a job in the last four weeks.
C) / not working or working part-time when he or she wishes to be working full time.
D) / not working and actively looking for a job in the last four weeks or discouraged and not actually looking for a job.
3. A survey reveals that on a small island 100 people have jobs, 25 people are looking for jobs, and 45 people are neither working nor looking for work. The unemployment rate on the island is:
A. 12.5%B. 20%C. 25%D. 50%
4. / Discouraged workers are those individuals:A) / who are getting paid too little.
B) / who do not like their jobs.
C) / who are working part time but are looking for a full-time job.
D) / who have given up looking for a job.
5. / Anna recently moved to Boston in order for her husband Joe to begin a new job as an economics professor at Harvard. Anna is an experienced surgeon who is currently interviewing with several different hospitals in Boston. Anna is currently:
A) / frictionally unemployed.
B) / structurally unemployed.
C) / cyclically unemployed.
D) / counted as employed since she is likely to receive a job offer soon.
6. / Sam, who is 55 years old and has been a steel worker for 30 years, is unemployed because the steel plant in his town closed and moved to Mexico. Sam is experiencing:
A) / cyclical unemployment.
B) / permanent unemployment.
C) / frictional unemployment.
D) / structural unemployment.
7. / Efficiency wages are wages that are:
A) / above equilibrium to encourage better performance.
B) / below equilibrium to encourage better performance to get a raise.
C) / responsible for all structural unemployment.
D) / above equilibrium to encourage better performance and are responsible for all structural unemployment.
8. / Which of the following equations describes the calculation of the natural unemployment rate?
A) / Natural unemployment = Frictional unemployment + Structural unemployment + Seasonal Unemployment
B) / Natural unemployment = Seasonal unemployment + Structural unemployment
C) / Natural unemployment = Frictional unemployment + Cyclical unemployment
D) / Natural unemployment = Frictional unemployment + Structural unemployment - Cyclical unemployment
9. / Which pair of policies is likely to have the effect of reducing the natural rate of unemployment?
A) / job training and employment subsidies
B) / high minimum wages and generous unemployment benefits
C) / job training and higher minimum wages
D) / employment subsidies and policies designed to strengthen labor unions
10. An example of cyclical unemployment is a(n):
A. autoworker who is laid off from an automobile company due to a decline in sales caused by a recession.
B. geologist who is permanently laid off from an oil company due to a new technological advance.
C. worker at a fast-food restaurant who quits work and attends college.
D. real estate agent who leaves a job in Texas and searches for a similar, higher paying job in California.
Table: Employment
11. The unemployment rate is:
A. 6.25%B. 6.45%C. 9.09%D. 9.37%
12. The labor force is:
A. 33 millionB. 32 millionC. 31 millionD. 22 million
13. A business cycle is:
A. a very deep and prolonged economic downturn.
B. a period in which output and employment are rising.
C. a period in which output and employment are falling.
D. a short-run alteration between economic upturns and downturns.
14. A recession leads to all of the following EXCEPT:
A. higher unemploymentB. reduced output C. reduced income and living standards D. higher employment
15. The sequence of business cycle phases is:
A. business cycle peak, trough, expansion, recessionB. business cycle peak, expansion, trough, recession
C. business cycle peak, recession, trough, expansionD. business cycle peak, expansion, recession, trough
16. A sudden loss of income or a significant increase in costly medical expenses are examples of:
A. economic insecurityB. economic inequalityC. poverty thresholdsD. non-means-tested programs
17. An example of a means-tested program is:
A. expenditure on national defenseB. Social Security payments to the disabled
C. the food stamp programD. purchasing a new city police car
18. Which of the following American welfare programs is an in-kind benefit that is not means-tested?
A. MedicaidB. MedicareC. Food StampsD. Supplemental Security Income
19. / Some economists argue that the official unemployment rate understates the true level of unemployment. Summarize these arguments.Answer Key
1. / A2. / B
3. / B
4. / D
5. / A
6. / D
7. / A
8. / A
9. / A
10. / A
11. / A
12. / B
13. / D
14. / D
15. C
16. A
17. C
18. B
19. If a worker is not actively seeking work because he has grown discouraged over his job prospects, he is categorized as a discouraged worker. These workers are not counted in the official ranks of the unemployed, yet their lack of work is real. There are some workers, the underemployed, that would like to have a full time job but cannot find one, so they are working at a part-time job. These workers are officially classified as employed, yet they are being underutilized. Adding the discouraged workers and underemployed workers to the official ranks of the unemployed would increase the unemployment rate.
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