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Macro Econ > Chapter 8 > Flashcards

Chapter 8 Flashcards

1
Q

Bureau of Labor Statistics (BLS):

A

in the United States, the government agency that compiles and publishes employment and unemployment statistics.

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2
Q

employed person (BLS household survey definition):

A

a person who did any work for pay or profit during the week before he or she is surveyed by the BLS or who worked for fifteen hours or more in a family business.

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3
Q

unemployed person (BLS definition):

A

a person who is not employed but who is actively seeking a job and is immediately available for work.

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4
Q

labor force (BLS definition):

A

people who are employed or unemployed

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5
Q

“not in the labor force” (BLS definition):

A

the classification given to people who are neither “employed” nor “unemployed”.

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6
Q

unemployment rate:

A

the percentage of the labor force made up of people who do not have paid jobs but are immediately available and actively looking for paid jobs.

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7
Q

marginally attached workers:

A

people who want employment and have looked for work in the past 12 months but not in the past 4 weeks.

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8
Q

discouraged workers:

A

people who want employment but have given up looking because they believe that there are no jobs available for them.

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9
Q

underemployment:

A

working fewer hours than desired or at a job that does not match one’s skills.
labor force participation (LFP) rate: the percentage of potential workers either with a job or actively seeking a job or the labor force as a percentage of the civilian non-institutional population.

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10
Q

frictional unemployment:

A

unemployment that arises as people are in transition between jobs.

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11
Q

structural unemployment:

A

unemployment that arises because people’s skills, experience, education, or location do not match what employers need.

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12
Q

cyclical unemployment:

A

unemployment caused by a drop in aggregate demand.

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13
Q

recession:

A

traditionally defined as occurring when GDP falls for two consecutive calendar quarters, now “officially” determined by the National Bureau of Economic Research.

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14
Q

sticky wage” theories:

A

theories about why wages stay at above-equilibrium levels, despite the existence of a labor surplus.

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15
Q

efficiency wage theory:

A

the theory that an employer can motivate workers to put forth more effort by paying them somewhat more than they could get elsewhere.

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16
Q

aggregate demand:

A

the total demand for all goods and services in a national economy.

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17
Q

labor productivity:

A

the market value of the output that results from a given amount of labor.

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18
Q

wage-productivity gap:

A

the gap between the growth of labor productivity and the growth of hourly labor compensation.

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19
Q

technological unemployment:

A

unemployment caused by reduced demand for workers because technology has increased the productivity of those who have jobs, effectively reducing the demand for workers.

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20
Q

skill-biased technical change:

A

the theory that relative wage gains will be the greatest for those workers who possess the education and skills to use modern technologies.

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21
Q

The U.S. agency that collects data on employment and unemployment is the____________ .

A

Bureau of Labor Statistics (BLS)

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22
Q

Joe performed 15 hours of unpaid work on his family farm. He would be considered to be an____________ person, according to the BLS.

A

Employed

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23
Q

Marwan lost his job as an airline mechanic, and has been sending out his resume to other potential employers. He would be willing to start working in a new job immediately. Bill would be counted as an _______________, according to the BLS.

A

Unemployed

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24
Q

Rachael says she wants to work and is available for work. She has recently looked for work but is currently not doing so. The BLS would call Rachael a ____________worker. If she gives as her reason that she is no longer looking for work because there are no jobs for her, she would be considered a ____________ worker.

A

Marginally Attached, Discouraged

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25
Q

The unemployment that arises due to transitions between jobs is called __________________ unemployment, whereas the unemployment that arises due to skills mismatches or geographic mismatches is called _________________ unemployment.

A

Frictional, Structural

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26
Q

The theories developed by Keynesian-oriented economists explaining why wages may remain above equilibrium even when there’s a surplus of labor are called ______________ theories.

A

Sticky Wage

27
Q

People working at jobs that underutilize their abilities, as well as those who work fewer hours than they wish to, are said to be _________________.

A

Underemployed

28
Q

Paying your workers higher than the market wage rate in order to improve productivity is an example of___________ theory.

A

Efficiency Wage

29
Q

______________________ is unemployment due to macroeconomic fluctuations.

A

Cyclical Unemployment

30
Q

The market value of the output that results from a given amount of labor is known as_________________________.

A

Labor Productivity

31
Q

T/F The BLS’s household survey and employer survey always get the same precise measure of the unemployment rate.

A

-False. The unemployment rate figures from the two surveys are sometimes different from each other and may point to diverging trends in unemployment.

32
Q

T/F The unemployment rate is the percentage of the population that does not have paid employment, but is immediately available and actively looking for work.

A

-False. It is not the percentage of the population, but the percentage of the labor force who do not have paid jobs but are immediately available and actively looking for work.

33
Q

T/F Almost all of the people who are unemployed are so because they have involuntarily lost their jobs.

A

-False. Only on average about half of the unemployed have involuntarily lost their jobs. Others have voluntarily quit, or are just entering the labor force, or re-entering it.

34
Q

T/F Structural unemployment arises because people’s skills, experience, education, or location do not match what employers need.

A

-True.

35
Q

T/F The peak level of unemployment following the 1981-1982 recession was higher than the peak level of unemployment following the Great Recession of 2007-2009.

A

-True.

36
Q

Why is high unemployment considered a bad thing?

A

-High unemployment means that a nation’s resources are being underutilized. It also poses great economic, psychological, and social costs on unemployed individuals, as well as their families & their communities. It is assoc’d with higher rates of depression, suicide, domestic violence, and lack of social cohesion.

37
Q

Describe the two surveys the BLS uses to gather unemployment data.

A

-The household survey questions 60,000 households on a monthly basis, asking whether the individual household members are working or not, and if not, if they are looking for work. The employer survey collects employment data from 400,000 employers.

38
Q

How does the BLS classify people who are “not in the labor force,” and what people are often in this
category?

A

-If an individual surveyed (that is, who is age 16 or over and not institutionalized) is neither employed or
unemployed, that individual is considered “not in the labor force” according to the BLS. Often people in this category are in school, retired, disabled, or taking care of people in their households and communities.

39
Q

Why is it often said that the official unemployment rate tends to underestimate the true extent of unemployment in the economy?

A

-Because discouraged workers and underemployed workers (involuntary part-time or workers not making use of their skills) are not counted among the unemployed in the official unemployment statistic.

40
Q

What are the three major types of unemployment? Which of these three types of unemployment tends to be spread broadly throughout the entire economy, as occurs as a result of a drop-off in aggregate demand?

A

-Frictional, structural, and cyclical unemployment. Cyclical unemployment is broadly spread through an economy during a downturn.

41
Q

What is the classical model’s explanation for involuntary unemployment?

A

-According to the classical model, involuntary unemployment only arises when there is something impeding market forces, like a minimum wage law, public safety net policies, regulations on business, or union activity.

42
Q

Identify two theories that explain why wages might be “sticky” at a higher than market equilibrium level.

A

Insider-outsider theory, and efficiency wage theory.

43
Q

Describe Keynes’s theory of aggregate demand, as it relates to wage levels and employment. Did Keynes believe that unemployment is caused by “sticky wages”?

A

-For Keynes, the problem with a drop in the demand for labor was not that wages would get stuck at a rate too high and fail to drop to a lower equilibrium rate, but that a drop in the wage would make the unemployment problem even worse. As workers experienced lower wages, they would cut back on spending, which lead to a drop in aggregate demand and output.

44
Q

The chapter describes two very different consequences for labor markets as natural resources become scarcer and/or increasingly expensive to extract. Explain these in detail.

A

-On the one hand, as natural resources become more expensive producers are likely to seek substitute inputs and that tendency is likely to put upward pressure on wages as the demand for labor increases. On the other hand, rising resource costs could generate macro-level supply shocks that could have negative effects on labor markets and put downward pressure on wages.

45
Q

What is a problem associated with high unemployment?

A

a. underutilization of national resources
b. loss of income
c. depression, suicide, and domestic violence
d. social unrest and loss of social cohesione.

46
Q

The labor force participation rate is…

A

the number of people in the labor force divided by the civilian, non institutionalized age and over population

47
Q

To be considered employed by the BLS, you need to…

A

have worked for pay or profit for at least one hour per week, or unpaid in a family-run business for at least 15 hours a week.

48
Q

Nabiha is currently not employed, but it thinking about getting a job and is browsing through the want
ads to see what kinds of jobs are available. The BLS would consider Nabiha to be:

A

not in the labor force

49
Q

Rebecca lost her real estate agent job after the housing bubble burst, and after several months of an
unsuccessful job search, she has stopped looking and entered a job retraining program to become a nurse.
The BLS would currently count Rebecca as:

A

not in the labor force

50
Q

Assume a very small economy comprised of the following people, all of whom are civilians, 16 years
and older.

Amir is happily employed.

Bert does not have work, but is actively sending out his resume to employers.

Miguel has not had work for quite a while, and occasi’ly flips through job ads to see what kinds of jobs are available.

Marlena has just graduated from college and is starting her job search.

Marijka
has left her job to care for her newborn child.

The labor force participation rate in this economy would be:

A

60%

51
Q

Suppose the population is 300 million. There are 146 million employed, and 7.2 million unemployed. Then the unemployment rate is:

A

4.7%

52
Q

Suppose the population is 300 million. There are 146 million employed, and 7.2 million unemployed.Suppose that 1 million of the 7.2 million unemployed become so discouraged that they drop out of the labor force. The unemployment rate is:

A

4.1%

53
Q

Which of the following groups has not historically and consistently experienced unemployment rates significantly higher than the average worker?

A

Women

54
Q

Fernando lost his job as a computer programmer during the last recession, and could only find part-time work for a couple hours a week at lower pay as a grocery store cashier. Fernando is:

A

underemployed

55
Q

Khaled used to work as an autoworker, and due to the decline of the U.S. auto industry, is now unemployed and thinking about retraining as a bicycle assembler.What type of unemployment is he experiencing?

A

structural unemployment

56
Q

Prasad lost his job during the last recession. What type of unemployment is he experiencing?

A

cyclical unemployment

57
Q

After raising two children, Mona has started looking for a job and sent out a few job applications. What
type of unemployment is she experiencing?

A

frictional unemployment

58
Q

Kimberly has finally had enough of her supervisor’s incompetence. She just left her job feeling confident
that she will have little difficulty finding another paid position using her skills which are in great demand
right now. What type of unemployment is she experiencing?

A

frictional unemployment

59
Q

jolly works as a department store Santa Claus. As Christmas day comes to a close he finds himself out
of work yet again. What type of unemployment is he experiencing?

A

seasonal unemployment

60
Q

According to the classical model of smoothly functioning labor markets, if the demand for labor falls,
for instance due to a drop in aggregate demand….

A

wages will fall and labor markets will return to full employment equilibrium, eliminating the
surplus of labor.

61
Q

What has been proposed as explanations for sticky wages?

A

a. psychological resistance to wage cuts
b. minimum wages and long term contracts
c. efficiency wages
d. barriers by insiders

62
Q

Bob the boss is paying his workers a bit higher than the market going wage, because he wants them to put in more effort on the job, and to reduce employee turnover. His actions would be an example of which
labor market theory?

A

efficiency wage theory

63
Q

Labor productivity refers to…

A

the purchasing power of inflation-adjusted wages

64
Q

Which of the following is not an element of the Keynesian critique of the classical model?

A

unemployment is NOT due to wages being “too high.”

Macro Econ (3 decks)

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