Review Questions

Review Questions


What is the difference between being unemployed and being out of the labor force?


How is the unemployment rate calculated? How is the labor force participation rate calculated?


Are all adults who do not hold jobs counted as unemployed?


If you are out of school but working part time, are you considered employed or unemployed in U.S. labor statistics? If you are a full-time student and working 12 hours a week at the college cafeteria, are you considered employed or not in the labor force? If you are a senior citizen who is collecting social security and a pension and working in a retail store are you considered employed or not in the labor force?


What happens to the unemployment rate when unemployed workers are reclassified as discouraged workers?


What happens to the labor force participation rate when employed individuals are reclassified as unemployed? What happens when they are reclassified as discouraged workers?


What are some of the problems with using the unemployment rate as an accurate measure of overall joblessness?


What criteria are used by the BLS to count someone as employed? As unemployed?


Assess whether the following would be counted as unemployed in the Current Employment Statistics survey.

  1. A husband willingly stays home with the children while his wife works
  2. A manufacturing worker whose factory just closed down
  3. A college student doing an unpaid summer internship
  4. A retiree
  5. Someone who has been out of work for two years but keeps looking for a job
  6. Someone who has been out of work for two months but isn’t looking for a job
  7. Someone who hates her present job and is actively looking for another one
  8. Someone who decides to take a part-time job because she could not find a full-time position

Are U.S. unemployment rates typically higher, lower, or about the same as unemployment rates in other high-income countries?


Are U.S. unemployment rates distributed evenly across the population?


When would you expect cyclical unemployment to be rising? Falling?


Why is there unemployment in a labor market with flexible wages?


Name and explain some of the reasons why wages are likely to be sticky downward adjustments.


What term describes the remaining level of unemployment that occurs even when the economy is healthy?


What forces create the natural rate of unemployment for an economy?


Would you expect the natural rate of unemployment to be roughly the same in different countries?


Would you expect the natural rate of unemployment to remain the same within one country over several decades?


What is frictional unemployment? Give examples.


What is structural unemployment? Give examples.


After several years of economic growth, would you expect the unemployment in an economy to be mainly cyclical or due to the natural rate of unemployment? Why?


What type of unemployment (cyclical, frictional, or structural) applies to each of the following:

  1. Landscapers laid off in response to a drop in new housing construction during a recession
  2. Coal miners laid off due to EPA regulations that shut down coal-fired power
  3. A financial analyst who quits her job in Chicago and is pursing similar work in Arizona
  4. Printers laid off due to drop in demand for printed catalogues and flyers, as firms go the Internet to promote an advertise their products
  5. Factory workers in the United States laid off as the plants shut down and move to Mexico and Ireland

When the actual unemployment rate is less than the natural rate of unemployment, what is a possible impact on the inflation rate?