CH 21

Question 1

if employers reduce wages for all workers, the best will leave

Answer 1

adverse selection of wage cuts argument

Question 2

unemployment closely tied to the business cycle, like higher unemployment during a recession

Answer 2

cyclical unemployment

Question 3

those who have stopped looking for employment due to the lack of suitable positions available

Answer 3

discouraged workers

Question 4

the theory that the productivity of workers, either individually or as a group, will increase if the employer pays them more

Answer 4

efficiency wage theory

Question 5

unemployment that occurs as workers move between jobs

Answer 5

frictional unemployment

Question 6

an unwritten agreement in the labor market that the employer will try to keep wages from falling when the economy is weak or the business is having trouble, and the employee will not expect huge salary increases
when the economy or the business is strong

Answer 6

implicit contract

Question 7

those already working for the firm are “insiders” who know the procedures; the other workers are “outsiders” who are recent or prospective hires

Answer 7

insider-outsider model

Question 8

this is the percentage of adults in an economy who are either employed or who are unemployed and looking for a job

Answer 8

labor force participation rate

Question 9

the unemployment rate that would exist in a growing and healthy economy from the combination of economic, social, and political factors that exist at a given time

Answer 9

natural rate of unemployment

Question 10

the unemployment rate that would exist in a growing and healthy economy from the combination of economic, social, and political factors that exist at a given time

Answer 10

natural rate of unemployment

Question 11

those who are not working and not looking for work—whether they want employment or not; also termed “not in the labor force”

Answer 11

out of the labor force

Question 12

across-the-board wage cuts are hard for an economy to implement, and
workers fight against them

Answer 12

relative wage coordination argument

Question 13

unemployment that occurs because individuals lack skills valued by employers

Answer 13

structural unemployment

Question 14

individuals who are employed in a job that is below their skills

Answer 14

underemployed

Question 15

the percentage of adults who are in the labor force and thus seeking jobs, but who do not have jobs

Answer 15

unemployment rate