Chapter 8 - Unemployment

Question 1

Out of the labour force

Answer 1

People who are not working and not looking for work

Question 2

Employed

Answer 2

Working for pay

Question 3

Unemployed

Answer 3

Out of work but searching for a job

Question 4

Labour force

Answer 4

Number of people who are employed and unemployed

Question 5

Unemployment rate

Answer 5

Percentage of adults who are in the labor force but who do not have jobs

Question 6

Unemployment rate equation

Answer 6

Unemployment rate = unemployed people / total labor force × 100

Question 7

Underemployed

Answer 7

People who are trained for a level of work who are working in a lower paying job or one that does not utilize their skills

Question 8

Discouraged workers

Answer 8

Have stopped looking for employment and are no longer counted in the unemployed

Question 9

Labour force participation rate

Answer 9

Percentage of people in an economy who are either employed or who are unemployed and looking for a job

Question 10

Current population survey (CPS)

Answer 10

Measures the percentage of the labor force that is unemployed

Question 11

Establishment payroll survey (EPS)

Answer 11

Payroll survey that measures the net change in jobs created for the month

Question 12

Those who typically have higher rates of unemployment

Answer 12

Women, young workers, African Americans, Hispanics, and those with less education

Question 13

Cyclical unemployment

Answer 13

Varying unemployment caused by the economy going through the business cycle

Question 14

Implicit contract

Answer 14

Employer will keep wages from falling when the economy or business is weak, and the employee will not expect salary increases when the economy or the business is strong

Question 15

Efficiency wage theory

Answer 15

Productivity of workers depends on their pay, so employers find it worthwhile to pay their employees more than market conditions dictate

Question 16

Adverse selection of wage cuts argument

Answer 16

Employer reacts to poor business conditions by reducing wages for all workers, then the best workers with employment alternatives are the most likely to leave

Question 17

Insider outsider model

Answer 17

Depends on insiders to be familiar with routine procedures, to train new outsiders, etc. However, cutting wages will alienate the insiders and damage the firm’s productivity

Question 18

Relative wage coordination argument

Answer 18

Wage cuts for all employees are hard for an economy to implement, and workers fight against them

Question 19

Natural rate of unemployment

Answer 19

Remaining level of unemployment that occurs even when the economy is healthy

Question 20

Frictional unemployment

Answer 20

Occurs as workers move between jobs

Question 21

Structural unemployment

Answer 21

Unemployment because they lack skills valued by the labor market

Question 22

When is the economy considered to be at full employment?

Answer 22

When actual unemployment rate is equal to the natural unemployment (5-6%)

Question 23

Hidden employment

Answer 23

Includes those like the underemployed, discouraged workers, or part-time workers looking for full-time jobs. They are still working, but not at the rate or amount of time they wish to be

Question 24

Reasons for unemployment

Answer 24

New entrants, re-entrants, job leavers, and job losers (temporary and non temporary

Question 25

Reasons for changes in natural unemployment

Answer 25

Internet, growth of temporary workers, and aging population