Chapter 9 - Unemployment + Its Natural Rate

Question 1

Employed means…

Answer 1

worked most of previous week at a paying job

Question 2

Unemployed means…

Answer 2

temporary layoff, looking/waiting to start

Question 3

Not in labour force means…

Answer 3

neither employed nor unemployed.

Question 4

unemployed and not in labour force are not difficult to distinguish between (t/f)

Answer 4

f

Question 5

labour force is…

Answer 5

total number of workers (employed + unemployed)

Question 6

Unemployment Rate formula…

Answer 6

100 x (number UE/labour force)

Question 7

labour force participation rate is….

formula…

Answer 7

percentage of population in labour force
100 x (labour force/adult population)

Question 8

Policy should be directed toward which type of unemployment (LR or SR)? why?

Answer 8

-direct toward LR b/c those UE in SR will become employed soon anyway.

Question 9

Natural rate of unemployment is…

…about what in Canada (%)

Answer 9

the long run u-rate.

6-8% in Canada

Question 10

Cyclical Unemployment is…

…also called

Answer 10

deviation from the natural rate.

also called business cycles

Question 11

Frictional unemployment is…

… SR or LR?

Answer 11

when workers search for the job best suited to their tastes, skills, etc.
SR unemployment.

Question 12

Structural Unemployment is…

…SR or LR?

Answer 12

when there are fewer jobs than there are workers.

LR unemployment.

Question 13

Job Search is…

Answer 13

matching of workers with appropriate/best suited jobs.

Question 14

Sectoral Shifts are…

…result are…

Answer 14

changes in Demand composition across industries.

they displace some workers which causes some frictional UE.

Question 15

Types of Gov’t Policy (3)?

Answer 15

1. Gov’t Employment Agencies
2. Public Training Programs
3. Employment Insurance

Question 16

Gov’t Employment Agencies do….

Answer 16

give info about job vacancies to speed up the job search.

Question 17

Public Training Programs are for….

Answer 17

equipping workers in declining industries with the skills to be effective in growing industries.

Question 18

Employment Insurance…

Answer 18

partially protects incomes when become unemployed.

Question 19

Minimum Wage Laws affect UE b/c…

Answer 19

may exceed eq’m wage for least skilled/experienced workers. This causes some structural UE, but is such a small population of the work force that it cannot explain all UE.

Question 20

Unions are supposed to…

Answer 20

exert market power to negotiate wages, benefits, etc.

Question 21

Collective Bargaining is…

Answer 21

when Unions + firms negotiate workers’ contracts.

Question 22

When Unions raise wage…

…causes two kinds of workers…

Answer 22

if above eq’m, Q of labour demanded falls and unemployment results.
…insiders (keep jobs) + outsiders (lose jobs)

Question 23

A negative view of unions is that they…

Answer 23

make allocation of labour inefficient b/c some ppl benefit at the expense of others.

Question 24

A positive view of unions is that they…

Answer 24

are an antidote to the firms’ market power b/c they force it to efficiently respond to workers’ needs.

Question 25

Efficiency Wages are…

Answer 25

when firms voluntarily pay above the eq’m price to boost productivity.

Question 26

4 reasons for paying Efficiency Wages…

Answer 26

1. Worker health
2. Worker turnover
3. Worker Quality
4. Worker Effort

Question 27

Worker health is benefited by efficiency wages b/c…

Answer 27

especially in less developed nations, a little more money goes a long way to ensuring much better health.

Question 28

Worker turnover is helped by efficiency wages b/c…

Answer 28

it provides an incentive to stay so the firm avoids training and hiring new employees.

Question 29

Worker Quality is helped by efficiency wages b/c…

Answer 29

a higher wage attracts better applicants.

Question 30

Worker effort is helped by efficiency wages b/c…

Answer 30

a higher wage means there is less Q of labour demanded, so there is an incentive to avoid being fired now.