Review Questions

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

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

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

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

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

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

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

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

16. Assess whether the following would be counted as “unemployed” in the Current Employment Statistics survey.

• A husband willingly stays home with children while his wife works.
• A manufacturing worker whose factory just closed down.
• A college student doing an unpaid summer internship.
• A retiree.
• Someone who has been out of work for two years but keeps looking for a job.
• Someone who has been out of work for two months but isn’t looking for a job.
• Someone who hates her present job and is actively looking for another one.
• Someone who decides to take a part time job because she could not find a full time position.

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

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

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

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

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

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

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

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

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

26. What is frictional unemployment? Give examples of frictional unemployment.

27. What is structural unemployment? Give examples of structural unemployment.

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

29. What type of unemployment (cyclical, frictional, or structural) applies to each of the following:

• landscapers laid off in response to a drop in new housing construction during a recession.
• coal miners laid off due to EPA regulations that shut down coal fired power
• a financial analyst who quits his/her job in Chicago and is pursing similar work in Arizona
• printers laid off due to drop in demand for printed catalogues and flyers as firms go the internet to promote an advertise their products.
• factory workers in the U.S. laid off as the plants shut down and move to Mexico and Ireland.

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