EC 202: Introduction to Economic Analysis: Macroeconomics

Prof. Piger

Week 4 Practice Problems

Choose the one alternative that best completes the statement or answers the question.

1) Suppose the working age population in Tiny Town is 100 people. If 25 of these people are
NOT in the labor force, the ____ equals ____.
A) unemployment rate; 25/100 x 100
B) unemployment rate; 25/125 x 100
C) labor force; 75
D) labor force; 25/100 x 100
Answer: C

2) Which of the following people is not considered unemployed in the Current Population
Survey?
A) The person has just finished school and has entered the labor force to look for work.
B) The person has been laid off and is looking for a new job.
C) The person is looking for work after not doing so for a time.
D) The person is discouraged about finding a job and so does not search for work.
Answer: D

3) The population of Tiny Town is 100 people and the labor force is made up of 75 people. If 5
of these people are unemployed, the unemployment rate is
A) (5/100) x 100.
B) (5/80) x 100.
C) (5/75) x 100.
D) There is not enough information provided to calculate the unemployment rate.
Answer: C

4) When an individual who has not been working but has been looking for work decides to
terminate the search process, the official unemployment rate
A) will remain unchanged
B) will rise
C) will fall
D) may fall or rise depending on whether or not the individual resumes his education
Answer: C

5) Which of the following is NOT included in the working-age population?

A) discouraged workers
B) people waiting to be called back to a job after being laid off
C) retirees under the age of 55
D) people in prison
Answer: D
6) In an economy, 42 million people are in the labor force, 38 million are employed, and 47
million are in the working age age population. How many people are not in the labor force?
A) 19 percent
B) 9 million
C) 5 million
D) 4 million
Answer: C

7) Which of the following people would be counted as employed in the Current Population
Survey?
A) Rich, who is working 20 hours a week but wants a full-time job
B) Misty, who just quit her job to return full-time to school
C) April, who just graduated from college and is looking for work
D) Jason, who was laid off from work less than 6 months ago but who has stopped
looking for work
Answer: A

8) Which of the following best fits the definition of unemployed?

A) retired and not working
B) working less than a full work week
C) not working but looking for a job
D) not working and not looking for work
Answer: C

9) Using the official measure of unemployment, which of the following people is considered
unemployed?
A) a part-time worker who wishes to work full time
B) a person who gave up looking for jobs because he or she was discouraged about his or
her job prospects
C) a person who has been searching for work, but turns down a job paying a lower wage
rate than desired
D) a person who is working but expects to be laid off at the end of the month
Answer: C

10) To calculate the unemployment rate, which of the following are necessary pieces of
information?
I. the number of unemployed persons
II. the population
III. the number of people in the labor force
IV. the working age population

A) I, II III and IV
B) I and II
C) I and III
D) I and IV
Answer: C
11) Suppose that the total labor force is 100 individuals with 10 unemployed. The
unemployment rate is ________. Now assume that 10 people drop out of the labor force and that
10 remain unemployed. The new unemployment rate is ________.
A) 9 percent; 10 percent
B) 10 percent; 9 percent
C) 10 percent; 11 percent
D) 11 percent; 10 percent
Answer: C

12) Suppose there are 100 million in the labor force, and 6 million unemployed people. During
the next month, 200,000 people lose their jobs and 300,000 who had been unemployed find jobs.
The new total of employed persons is ________ and the new unemployment rate is ________.
A) 100.1 million; 5.8 percent
B) 100 million; 6.1 percent
C) 94.1 million; 5.9 percent
D) 93.9 million; 6.1 percent
Answer: C

13) Suppose the working-age population is 220 million, the labor force is 150 million, and the
unemployment rate is 10 percent. The number of unemployed people is
A) 15 million.
B) 22 million.
C) 37 million.
D) 7 million.
Answer: A

14) Between September 2013 and September 2014 the number of people employed part-time for
economic reasons decreased from 7.9 million to 7.1 million. Assuming the change resulted from
part-time workers transitioning to full-time jobs, this change created
A) no change to the unemployment rate.
B) a decrease to the unemployment rate.
C) an increase to the unemployment rate.
D) an increase in the working age population.
Answer: A
 Number of
people
(millions)
Total population 246
Working-age 207
population
Labor force 139
Employed 133
Unemployed 6

15) Using the information in the above table, the unemployment rate is
A) 4.5 percent
B) 4.3 percent
C) 2.8 percent
D) 6.0 percent
Answer: B

16) Frictional unemployment is the result of

A) technological change or foreign competition.
B) normal labor market turnover.
C) a slowdown in the rate of economic expansion.
D) irresponsible workers with poor work habits.
E) none of the above.
Answer: B

17) Structural unemployment is

A) associated with the normal changing of jobs in a dynamic economy.
B) associated with the general downturns in the economy.
C) associated with the general decline of specific industries.
D) almost always short-term in nature.
Answer: C

18) Cyclical unemployment

A) is always present in an economy.
B) is higher during an expansion.
C) decreases during a recession.
D) fluctuates over the business cycle.
Answer: D

19) When a person reenters the labor force and looks for a job after spending time at home
raising a child,
A) cyclical unemployment increases.
B) structural unemployment decreases.
C) frictional and cyclical unemployment increase.
D) frictional unemployment increases.
Answer: D
20) Suppose the country of Tiny Town decided to open its borders to free trade. As a result, a
number of its workers lost their jobs to international competition and can’t find new jobs because
their skills don’t match what is required for job openings. The workers who lost their jobs would
best be considered part of
A) frictional unemployment.
B) structural unemployment
C) cyclical unemployment.
D) discouraged workers.
Answer: B

21) Suppose that Matt quits a job with the XYZ Corporation in order to look for more rewarding
employment. Matt would best be considered:
A) cyclically unemployed
B) still being employed
C) frictionally unemployed
D) included in the economy's "hidden employment"
Answer: C

22) A recession causes a decrease in the demand for housing, resulting in substantial layoffs in
the construction industry. The people laid off are considered:
A) frictionally unemployed
B) structurally unemployed
C) seasonally unemployed
D) cyclically unemployed
Answer: D