Chapter 8

Question 1

Wage rigidity

Answer 1

The failure of wages to adjust to equilibrate labor supply and labor demand

Question 2

Structural unemployment

Answer 2

The unemployment resulting from wage rigidity and job rationing

Question 3

Possible causes of wage rigidity

Answer 3

Minimum wage laws
Unions and collective bargaining
Efficiency wages

Question 4

Insiders

Answer 4

Workers who are already employed and therefore have an influence on wage bargaining

Question 5

Outsiders

Answer 5

Workers who are not employed and therefore have no influence on wage bargaining

Question 6

Efficiency-wage theories

Answer 6

Theories of real wage rigidity and unemployment according to which firms raise labor productivity and profits by keeping real wages above the equilibrium level

Question 7

Frictional unemployment

Answer 7

The unemployment that results because it takes time for workers to search for the jobs that best suit their skills and tastes

Question 8

Sectoral shift

Answer 8

A change in the composition of demand among industries or regions

Question 9

Unemployment insurance

Answer 9

A government program under which unemployed workers can collect benefits for a certain period of time after losing their jobs

Question 10

Matching function

Answer 10

The mathematical relationship that shows how the number of unemployed workers and the number of job openings determine the number of new hires

Question 11

Discouraged workers

Answer 11

Individuals who have left the labor force because they believe there is little hope of finding a job