Chapter 28: Unemployment and Its Natural Rate

Question 1

Labor force

Answer 1

The total number of workers who have made themselves available for work.
Labor force = the unemployed + the employed

Question 2

Unemployment rate

Answer 2

Percentage of the labor force that is unemployed

Question 3

Labor-force participation rate

Answer 3

Percentage of the adult population in the labor force

Question 4

Natural rate of unemployment

Answer 4

Normal rate of unemployment about which the

unemployment rate fluctuates

Question 5

Cyclical unemployment

Answer 5

The deviation of the unemployment rate from its natural rate

Question 6

Discouraged workers

Answer 6

Workers who stop looking for work due to an unsuccessful search

Question 7

Frictional unemployment

Answer 7

Unemployment due to the time it takes for workers to search for the jobs that best suit their tastes and skills

Question 8

Structural unemployment

Answer 8

Unemployment that results because the number of jobs available in some labor markets is insufficient for everyone who wants a job to get one

Question 9

Job search

Answer 9

The process by which workers find appropriate jobs given their tastes and skills

Question 10

Sectoral shifts

Answer 10

Changes in the composition of demand across industries or regions

Question 11

Unemployment insurance

Answer 11

A government program that pays laid-off workers a portion of their original salaries

Question 12

Union

Answer 12

Worker association that bargains with employers over wages, benefits, and working conditions

Question 13

Collective bargaining

Answer 13

The process by which unions and firms agree on labor contracts

Question 14

Strike

Answer 14

An organized withdrawal of labor from the firm

Question 15

Insiders

Answer 15

Those employed in union jobs

Question 16

Outsiders

Answer 16

Those not employed in union jobs

Question 17

Right-to-work laws

Answer 17

Legislation that makes it illegal to require union membership for employment

Question 18

Efficiency wages

Answer 18

Wages voluntarily paid in excess of the competitive equilibrium wage to increase worker productivity

Question 19

Employed

Answer 19

worked as paid employees, worked in their own business or family business (full-time or part-time), or had a job but didn’t work due to temporary absence

Question 20

Unemployed

Answer 20

not employed but were available for work and looked for work in the last four weeks, or on temporary layoff

Question 21

Not in the labor force

Answer 21

EX: student, homemaker, retiree

Question 22

company town

Answer 22

a place where practically all stores and housing are owned by the one company that is also the main employer