Mod 12 -13

Question 1

what happens to the unemployment rate during recessions?

Answer 1

cyclical unemployment rises during recession and
it falls during the expansion

Question 2

employed

Answer 2

people who are currently holding a job in the economy, either full time or part time

Question 3

unemployed

Answer 3

people are actively looking for work but aren’t currently employed. *must be able and willing to work and have been searching for past 4 weeks

Question 4

labor force =

Answer 4

employed + unemployed

Question 5

unemployment rate

Answer 5

(number of employed workers / labor force) X 100

Question 5

Discouraged Workers

Answer 5

non-working people who are capable of working but have given up looking for a job due to the state of the job market.
-this group represents a limitation of the unemployment rate because it does not count them as unemployed-

Question 6

labor force participation rate =

Answer 6

(labor force / population of age 16+) X 100

Question 7

Marginally Attached Workers

Answer 7

would like to be employed and have looked for a job in the recent past but are not currently looking for work (maybe they are in school, have a kid, disabled or discouraged). (not included in labor force either)

Question 8

Underemployed

Answer 8

workers who would like to work more hours or who are overqualified for their jobs. (don’t count as unemployed)

Question 9

Prime working ages

Answer 9

24-54

Question 10

what are the three categories of frustrated workers?

Answer 10

discouraged, marginally attached, underemployed

Question 11

When real GDP is falling, what happens to the unemployment rate?

Answer 11

unemployment rate rises

Question 12

When real GDP is rising, what happens to the unemployment rate?

Answer 12

unemployment rate falls

Question 13

what could cause more unemployment?

Answer 13

high minimum wage and unemployment benefits

Question 14

Structural Unemployment

Answer 14

results when workers lack the skills required for the available jobs or there are more people searching for jobs in a labor market than there are jobs available at the current wage rate
*workers skills do not match the economy –college?

Question 15

Frictional Unemployment

Answer 15

-the one you want the most of-
:unemployment due to the time workers spend in job search
inevitable
*there are always new entrants to the workforce and people leave jobs for a variety of reasons

Question 16

what happens when the government establishes or raises the minimum wage?

Answer 16

The number of workers wanting to work are greater than the number demanded at the wage rate. = surplus of wage = structural Unemployment b/c price floor

Question 17

Causes of Structural Unemployment

Answer 17

-mismatch between workers skills and job requirements
-technological change and automation (artificial intelligence)
-geographic migration of people or jobs
-minimum wages: gov mandated Floor on price of labor
-labor unions: win higher wages by process of collective bargaining (labor strike)
-efficiency wages

Question 18

Efficiency Wages

Answer 18

Wages that employers set above the equilibrium wage rate as an incentive for better employee performance.

Question 19

Solution to structural unemployment

Answer 19

job training: b/c it increases human capital
employment subsidies: financial incentive to employers

Question 20

Natural rate of unemployment

Answer 20

aka normal/ minimum feasible unemployment rate/ non-cyclical rate
:unemployment rate that arises from the effects of frictional and structural unemployment

Question 21

The natural rate of unemployment =

Answer 21

frictional unemployment + structural unemployment

Question 22

Cyclical unemployment

Answer 22

deviation of the actual rate of unemployment from the natural rate

Question 23

Actual unemployment =

Answer 23

natural rate of unemployment + cyclical unemployment

Question 24

why do employers favor older workers?

Answer 24

they are more experienced and keep jobs longer because they more often have a family to provide for and they need to be the breadwinner

Question 25

What factors influence the natural rate of unemployment?

Answer 25

changes in characteristics of the labor force, labor market institutions and government policies

Question 26

fiscal policy

Answer 26

executive and legislative branch
*remember the government Is not going to do anything about frictional unemployment

Question 27

monetary policy

Answer 27

central bank

Question 28

derived demand

Answer 28

jobs that come based on demand

Question 29

hidden workers

Answer 29

illegal jobs and cash jobs

Question 30

marginal propensity to consume

Answer 30

the rate that people spend the money they make per dollar.
MPC = 0.7 means people spend 70% of every dollar of their disposable income
–> Bush did the stimulus checks to get the MPC up but most people just saved the check

Question 31

what about seasonal employment

Answer 31

seasonal employment is adjusted for