Exam Eight

Question 1

According to John Maynard Keynes, the key to reducing high levels of unemployment was to…

Answer 1

increase aggregate demand

Question 2

According to the Classical labor market model, a minimum wage above the equilibrium wage will result in…

Answer 2

an increase in unemployment

Question 3

Consider the various types of unemployment discussed in the text, which type of unemployment is LEAST likely to be affected by government policies?

Answer 3

Frictional unemployment

Question 4

How would the U.S. Bureau of Labor Statistics classify a 15-year old individual working 10 hours per week at a restaurant?

Answer 4

Not surveyed

Question 5

How would the U.S. Bureau of Labor Statistics classify a 20-year old individual enrolled in college full-time and working 5 hours per week in the campus bookstore?

Answer 5

Employed

Question 6

Over the last several decades in the United States labor force participation rates…

Answer 6

have generally decreased for men but increased for women.

Question 7

Suppose the U.S. Bureau of Labor Statistics classifies 135 million people as employed and the unemployment rate is 10%. How many people are in the labor force in this example?

Answer 7

150 million

Question 8

The efficiency wage theory states that…

Answer 8

employers can motivate employees by paying them more than the prevailing wage.

Question 9

The introduction of compact discs made vinyl records obsolete. To the extent this caused higher unemployment among workers who had manufactured records, which type of unemployment was created?

Answer 9

Structural unemployment

Question 10

The U.S. Bureau of Labor Statistics bases its unemployment statistics on what population?

Answer 10

All civilian, non-institutionalized people over age 16

Question 11

What is the main policy implication of applying the Classical model to the labor market?

Answer 11

The government should limit regulations and social programs in order to increase the efficiency of the market.

Question 12

What type of unemployment would prevent the unemployment from falling to zero, even in a very good job market?

Answer 12

Frictional unemployment

Question 13

Which one of the following statements is FALSE?

Answer 13

Someone not currently working who has just entered the labor force after graduating college and is actively seeking his or her first job would not be classified as unemployed by the U.S. Bureau of Labor Statistics.

Question 14

T/F: Discouraged workers are a subset of those workers classified as not in the labor force by the U.S. Bureau of Labor Statistics.

Answer 14

True

Question 15

T/F: A rise in unemployment associated with a recession would be classified as cyclical unemployment.

Answer 15

True

Question 16

T/F: Most of the people in the United States who work more than 50 hours per week would prefer to work fewer hours.

Answer 16

True

Question 17

T/F: Over the last several decades in the United States the labor force participation rate for men has decreased while the rate for women has increased.

Answer 17

True

Question 18

T/F: The fact that many workers have given up actively looking for jobs implies that the actual unemployment rate is higher than the rate officially published by the U.S. Bureau of Labor Statistics.

Answer 18

True

Question 19

T/F: In the Classical model of the labor market, enacting a minimum wage above the equilibrium wage would lead to an increase in unemployment.

Answer 19

True

Question 20

T/F: The efficiency wage theory states that wages should be set with short-term contracts to allow for flexibility as market conditions vary.

Answer 20

False