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BROCK UNIVERSITY
Econ 1P92, Winter 2021
Department of Economics
Assignment 5-Answer key

Due: In Dropbox on OCT. 24, 2022 by 9am (Brock time).

Instructions: Hand in answers to the following questions. You can convert your file to a
PDF file and upload it to Dropbox. No late assignments will be accepted. Please put your
name and student number on your assignment. Total marks:50
1. Meredith is looking for work as a computer programmer. Although her prospects are
good, she hasn't yet taken a job. Julie is looking for work in a steel mill, but there aren’t
many job ads for steel workers and every time she shows up for an interview, there are
many more people than openings. Which statement best describes the nature of their
unemployment? (2 marks)
a. Meredith and Julie are both frictionally unemployed.
b. Meredith and Julie are both structurally unemployed.
c. Meredith is frictionally unemployed, and Julie is structurally unemployed.
d. Meredith is structurally unemployed, and Julie is frictionally unemployed.

Table 9-1
This table shows the 2019 data for males and females aged 15 and over in the country of Bolivar.

Not in the Labour Force Unemployed Employed

Male Female Male Female Male Female
45 million 35 million 5 million 5 million 85 million 65 million
2. Refer to Table 9-1. What is the adult labour-force participation rate in Bolivar?(2 markS)

a. 6.3 percent b. 33.3 percent

c. 62.5 percent d. 66.7 percent

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3. Suppose that some people report themselves as unemployed when, in fact, they are
working in the underground economy. If these persons were counted as employed, how
would the labour statistics change?(2 marks)
a. The unemployment rate and the labour-force participation rate would be higher.
b. The unemployment rate and the labour-force participation rate would be lower.
c. The unemployment rate would be higher, and the labour-force participation rate
would be lower.
d. The unemployment rate would be lower, and the labour-force participation rate
would be unaffected.
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Figure 9-2

4. Refer to Figure 9-2. If the minimum wage fell from $7 to $5, what would happen to
unemployment?(2 marks)
a. It would fall by 20. b. It would fall by 40.
c. It would be unchanged. d. It would rise by 20.

5. What is the effect of anything that makes the efficiency wage rise relative to the market-
clearing wage?(2 marks)
a. It increases both the quantity demanded and the quantity supplied of labour.
b. It decreases both the quantity demanded and the quantity supplied of labour.
c. It increases the quantity demanded and decreases the quantity supplied of labour.
d. It decreases the quantity demanded and increases the quantity supplied of labour.
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6. How is the labour-force participation rate computed?(2 marks)

a. as the number of adults in the labour force divided by the adult population times
100
b. as the number of adults in the labour force divided by the number of unemployed
times 100
c. as the number of adults in the labour force divided by the unemployment rate
times 100
d. as the number of adults in the labour force times the participation rate times 100

7. What does the natural unemployment rate include?(2 marks)

a. both frictional and structural unemployment
b. neither frictional nor structural unemployment
c. structural unemployment, but not frictional unemployment
d. frictional unemployment, but not structural unemployment

8. Some people are counted as out of the labour force because they have made no serious or
recent effort to look for work. However, some of these people may want to work even
though they are too discouraged to make a serious effort. If these persons were counted as
unemployed instead of out of the labour force, how would the labour statistics change?(2
marks)
a. The unemployment rate and the labour-force participation rate would be higher.
b. The unemployment rate would be higher, and the labour-force participation rate
would be lower.
c. The unemployment rate would be lower, and the labour-force participation rate
would be higher.
d. The unemployment rate and the labour-force participation rate would be lower.
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9. A foreign governmental statistics agency recently reported that there were 37.6 million
people over age 25 who had at least a bachelor’s degree. Of this number, 28.0 million
were in the labour force and 25.9 million were employed. What was the unemployment
rate in this group?(2 marks)
a. about 5.6 percent b. about 7.5 percent
c. about 7.7 percent d. about 31.1 percent

10. Consider two people who are currently out of work. Bernie is not looking for work
because there have been many job cuts where he lives and he doesn’t think it likely that
he will find work. Bev is not currently looking for work, but she would like a job. While
she hasn’t looked for work for some time, she has looked for work in the past. How does
Statistics Canada consider Bernie and Bev?(2 marks)
a. Statistics Canada considers both Bernie and Bev to be discouraged searchers.
b. Statistics Canada considers neither Bernie nor Bev to be discouraged searchers.
c. Statistics Canada considers only Bernie to be a discouraged searcher.
d. Statistics Canada considers only Bev to be a discouraged searcher.

11. What does the labour-force participation rate measure?(2 marks)

a. the percentage of the total adult population that is in the labour force
b. the percentage of the total adult population that is employed
c. the percentage of the labour force that is employed
d. the percentage of the labour force that is either employed or unemployed

12. The following people are currently out of work: Aimee, who is actively looking for a job;
Ken, who is not looking for a job because he doesn’t think he could find one; Alex who is
working part-time but is looking for full-time work; and Ian, who is not looking for a job
because he takes care of his twin sons. Who does Statistics Canada consider to be
unemployed?(2 marks)
a. Aimee b. Ken
c. Alex d. Ian
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13. Last year, a government reported an increase in the number of people who were
employed and an increase in the unemployment rate. Which statement would best explain
the report?(2 marks)
a. There was an increase in labour force.
b. There was a decrease in labour force.
c. There was an increase in adult population.
d. There was a decrease in adult population.

14. How is a college student who is not working or looking for a job counted?(2 marks)
a. as neither employed nor part of the labour force
b. as unemployed and in the labour force
c. as unemployed, but not in the labour force
d. as employed and in the labour force

15. Which statement best defines the natural rate of unemployment?(2 marks)
a. It is the unemployment rate that would prevail with zero immigration.
b. It is the rate associated with the highest possible level of GDP.
c. It is the difference between long-run and short-run unemployment rates.
d. It is the amount of unemployment that the economy normally experiences.

16. Which of the following constitutes the labour force?(2 marks)

a. the number of people who are employed
b. the number of people who are unemployed
c. the number of people employed plus the number of people unemployed
d. the number of people in the adult population
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17. Which statement best defines collective bargaining?(2 marks)

a. It is the process by which the government sets exemptions from the minimum-
wage law.
b. It is setting the same wage for all employees to prevent jealousy among workers.
c. It is the situation when firms collude to set the wages of employees in order to
keep them below equilibrium.
d. It is the process by which unions and firms agree on the terms of employment.

18. How are discouraged workers counted in unemployment statistics?(2 marks)

a. They are not counted either as part of the adult population or as part of the labour
force.
b. They are counted as part of the adult population, but not as part of the labour
force.
c. They are counted as part of the adult population and as unemployed.
d. They are counted as unemployed, but not part of labour force.

19. Who is considered unemployed?(2 marks)

a. Rachel, who is on maternity leave
b. Leslie, who is an involuntary contract to contract worker
c. Cassandra, who is on voluntary unpaid leave to travel the world
d. Lucas, who is on temporary layoff

Table 9-1
This table shows the 2019 data for males and females aged 15 and over in the country of Bolivar.

Not in the Labour Force Unemployed Employed

Male Female Male Female Male Female
45 million 35 million 5 million 5 million 85 million 65 million
20. Refer to Table 9-1. What is the adult population in Bolivar?(2 marks)
a. 90 million b. 160 million
c. 2300 million d. 240 million
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21. Some people are unemployed because they are searching for a very specific job. How are
these people best classified?(2 marks)
a. as cyclically unemployed b. as structurally unemployed
c. as frictionally unemployed d. as discouraged workers

Figure 9-1

This figure shows the effect of a minimum-wage law.

22. Refer to Figure 9-1. Which of the following describes the equilibrium point in the
diagram where there is an absence of the minimum-wage law?(2 marks)
a. $4 and 20 workers b. $5 and 30 workers
c. $5 and 40 workers d. $6 and 40 workers

23. How does Statistics Canada call a person who has a temporary, part-time job?(2 marks)
a. not in the labour force b. unemployed
c. partially employed d. employed
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24. What does the theory of efficiency wages explain?(2 marks)

a. why setting wages at the equilibrium level may increase unemployment
b. why it may be in the best interest of firms to offer wages that are above the
equilibrium level
c. why the most efficient way to pay workers is to pay them according to their skills
d. why it is efficient for firms to set wages at the equilibrium level

25. Which statement is characteristic of the natural rate of unemployment?(2 marks)

a. It is a consistent rate, year after year.
b. It is the desirable rate of unemployment.
c. It is a variable that cannot be altered by economic policy.
d. It is the amount of unemployment that the economy normally experiences.