Labor Markets

Question 1

Define the Labor force

Answer 1

Employed + unemployed

Question 2

Define Employed

Answer 2

Working for pay

Question 3

Define unemployed

Answer 3

Not working and not looking for work in 4 weeks

Question 4

Define those not in the Labor force

Answer 4

Not working and not looking for work

Question 5

State the equation for unemployment rate

Answer 5

unemployed/labor force

Question 6

State the equation for Labor Force Participation

Answer 6

Labor force/ population

Question 7

State the equation for Employment - population ratio

Answer 7

Employed/population

Question 8

State the trend with women’s employment rates

Answer 8

25-54 women’s employment rates peaked in 2000s

Question 9

State the trend with men’s employment rates

Answer 9

25-54 Men’s employment rates have been declining since 1990s

Question 10

Describe how to raise employment rates

Answer 10

Reduce unemployment rates
Labor force participation rates go up

Question 11

Describe some ideas on how to raise employment rates

Answer 11

Improve education
Expand Childcare
Increase work incentives
reduce work incentives

Question 12

Describe it’s effect in developing countries

Answer 12

Less effective
Hard to tell employment vs Unemployed
Informal sector makes it hard to measure and interpret unemployment rates

Question 13

Define Frictional unemployment

Answer 13

Unemployment resulting from imperfect information bout available jobs and from the time consuming process of job searching

Question 14

Define Structural unemployment

Answer 14

When the quantity of labor supplied persistently exceeds the quantity of labor demanded - wage rigidity is a key part

Question 15

Define Natural rates

Answer 15

The rate of unemployment around which a healthy economy fluctuates

Question 16

Define Cyclical unemployment

Answer 16

Actual unemployment rate - natural rate

Question 17

State the issue with the natural rate

Answer 17

Hard to know what precisely it is
Not actually natural

Question 18

Describe the increase in structural unemployment and natural rate

Answer 18

Overly rigid labor markets
Insufficiently supportive labor markets
Less effective education
Excessively high minimum wage

Question 19

State an effect of recession

Answer 19

Higher cyclical unemployment

Question 20

Explain why part of the labor supply curve is vertical

Answer 20

Higher wages are a reason to work more but offset by a reason to work less

Question 21

Describe what shifts the labor demand curve

Answer 21

Prices for goods/services rise
Demand for goods/services rise
Changing technology
Input prices fall

Question 22

Describe what shifts the Labor supply curve

Answer 22

Workers tastes shift towards more work
Falling opportunity cost of time spent working
Increased population

Question 23

Describe what occurs when demand for labor falls

Answer 23

Wages and prices fall

Question 24

Describe Nominal wages

Answer 24

Wages measured in a currency , can only be lowered by reducing a pay check

Question 25

Describe Real wages

Answer 25

Wage adjusted for inflation, can be lowered via pay check or by keeping pay the same while prices rise

Question 26

Describe the supply view of GDP

Answer 26

Y = a * F(K,H)
Downturn if K and H are going down - people are unemployed and factories are idle

Question 27

Describe the demand view of GDP

Answer 27

Y = C + I + G + (X-M)
Downturn would be if C and I are less, People and businesses are spending less

Question 28

Describe how the labor market is linked with the supply and demand curve

Answer 28

Whenever any part of the demand function is lowered then labor demand is reduced and the quantity of labor in the production function is reduced

Question 29

State the two rules of Okun’s law

Answer 29

Movement in unemployment rate is closely linked to movements in output
Reflects both direct and indirect effects of changes in unemployment on GDP