Chapter 33

Question 1

Q - 1: what does entrepreneurship have to do with unemployment ?

Answer 1

Entrepreneurship creates jobs; if someone is entrepreneurial he or she can never be unemployed.

Question 2

Microeconomic categories of unemployment:

Answer 2

1. How people become unemployed
2. Demographic unemployment
3. Duration of unemployment
4. Unemployment by industry

Question 3

Q - 2: how did the nature of unemployment change in the downturn of 2008?

Answer 3

After the downturn of 2008, the duration of unemployment increased significantly, creating s larger pool of people experiencing long-term unemployment.

Question 4

Okun’s Rule of Thumb

Answer 4

A 1 percentage point rise in the unemployment rate will tend to be associated with a 2 percent fall in output from its trend and vice versa.

Question 5

What unemployment rate is consistent with potential output?

Answer 5

5%

Question 6

What is the assumed underlying growth trend rate?

Answer 6

2.25 to 3.5 percent

Question 7

Q- 3: if economic output falls 2 percent below its trend, what does Okun’s rule predict happens to the unemployment rate?

Answer 7

It rises by 1%

Question 8

Cyclical unemployment

Answer 8

Happens because economy goes bad it is expected to end when the economy gets better

Question 9

Structural unemployment

Answer 9

Because of changes in economy structure like businesses change factories shut down can’t find work you are qualified for etc

Question 10

What helps cyclical unemployment ?

Answer 10

Expansionary macro policy (fiscal and monetary)

Question 11

Will macro policies solve structural unemployment?

Answer 11

No

Question 12

Reservation wage

Answer 12

The wage the worker is expecting before getting a job

Question 13

Q - 4: how is the reservation wage related to structural unemployment?

Answer 13

If people have an expectation of a certain wage and their job ends they aren’t going to want to take a new different job for lower

Question 14

Q - 5: what are four reasons the target rate of unemployment has changed in the United States?

Answer 14

1. Workforce is younger and young people change jobs more
2. More women have entered the workforce
3. Government has expanded income support programs
4. Globalization has effected some job sectors

Question 15

Q - 6: has globalization affected jobs more in the tradable or untradable sector?

Answer 15

The traceable sector. Lowers wages and raises unemployment in it.