1. chapter: ©2009  Worth Publishers >> Krugman/Wells Unemployment and Inflation 8 CHECK YOUR UNDERSTANDING

2. NEW CHECK YOUR UNDERSTANDING Check Your Understanding 8-1 Question 1* The accompanying table contains employment data for a very small economy. Full-time employed60 Not working but looking for work 6 Part-time workers30 Discouraged workers 4

3. NEW CHECK YOUR UNDERSTANDING 1a*) The labor force is: 1.100. 2.96. 3.90. 4.60. Full-time employed60 Not working but looking for work 6 Part-time workers30 Discouraged workers 4

4. NEW CHECK YOUR UNDERSTANDING 1b*) The unemployment rate is: 1.4%. 2.6%. 3.6.25%. 4.11%. Full-time employed60 Not working but looking for work 6 Part-time workers30 Discouraged workers 4

5. Check Your Understanding 8-1 Question 1

6. 1a) Suppose the advent of employment websites enables job seekers to find a suitable job more quickly. What effect would this have on the unemployment rate over time? 1.It would cause a reduction in the unemployment rate over time. 2.It would cause an increase in the unemployment rate over time. 3.no effect

7. 1b) Suppose the advent of employment Web sites causes job seekers who had given up their job search to begin looking again. What effect would this have on the unemployment rate over time? 1.It would cause a reduction in the unemployment rate over time. 2.It would cause an increase in the unemployment rate over time. 3.no effect

8. Check Your Understanding 8-1 Question 2 In which of the following cases is a worker counted as unemployed?

9. 2a) Rosa, an older worker who is laid off and who gave up looking for work months ago. 1.counted as unemployed 2.not counted as unemployed

10. 2b) Anthony, a schoolteacher who is not working during his three-month summer break. 1.counted as unemployed 2.not counted as unemployed

11. 2c) Grace, an investment banker who has been laid off and is currently searching for another position. 1.counted as unemployed 2.not counted as unemployed

12. 2d) Sergio, a classically trained musician who can only find work playing for local parties. 1.counted as unemployed 2.not counted as unemployed

13. 2e) Natasha, a graduate student who went back to school because jobs were scarce. 1.counted as unemployed 2.not counted as unemployed

14. Check Your Understanding 8-1 Question 3 Which of the following are consistent with the observed relationship between growth in real GDP and changes in the unemployment rate?

15. 3a) A rise in the unemployment rate accompanies a fall in real GDP. Is this statement consistent with the observed relationship between growth in real GDP and changes in the unemployment rate? 1.yes 2.no

16. 3b) A business recovery is associated with a greater percentage of the labor force being employed. Is this statement consistent with the observed relationship between growth in real GDP and changes in the unemployment rate? 1.yes 2.no

17. 3c) Negative real GDP growth is associated with a fall in the unemployment rate. Is this statement consistent with the observed relationship between growth in real GDP and changes in the unemployment rate? 1.yes 2.no

18. Check Your Understanding 8-2 Questions 1-3

19. 1a) Frictional unemployment is higher when the pace of technological advance quickens. 1.True 2.False

20. 1b) When the unemployment rate is low, frictional unemployment will account for a relatively _______ share of total unemployment. 1.small 2.large

21. 2) What is the effect of collective bargaining on the unemployment rate? 1.The unemployment rate would fall under collective bargaining because unions are able to negotiate a higher wage, which entices more people to enter the labor force. 2.The unemployment rate would rise under collective bargaining because unions are able to negotiate a higher wage which acts as a price floor, driving apart the quantity of labor supplied and the quantity of labor demanded.

22. 3) An increase in benefits for unemployed workers would cause the natural unemployment rate to: a)rise. b)fall.

23. Check Your Understanding 8-3 Questions 1 and 2

24. 1) The widespread use of technology has revolutionized the banking industry, making it much easier to access and manage their assets. Does this mean that the shoe leather costs of inflation are larger or smaller than they used to be? a)larger b)smaller

25. 2) Most people in the U.S. have become accustomed to inflation around 2-3%. Lenders would gain if inflation came to a complete stop over the next 15 or 20 years. 1.True 2.False