Economics 11 Q4 - Unemployment

What does the unemployment rate measure?

• The percentage of the labor force that is unemployed

• The total population that is unemployed

• The number of people unemployed for over a year

• The difference between job vacancies and applicants

Answer explanation

Explanation: The unemployment rate measures unemployed individuals actively seeking work as a percentage of the labor force.

Cyclical unemployment occurs due to:

• Technological advancements

• A lack of demand for goods and services

• Seasonal variations in production

• Job transitions

Answer explanation

Explanation: Cyclical unemployment is caused by economic downturns, reducing demand for labor.

Frictional unemployment refers to:

• Workers who are temporarily unemployed while switching jobs

• Unemployment due to long-term economic shifts

• Seasonal unemployment in industries like tourism

• Unemployment caused by automation

Answer explanation

Explanation: Frictional unemployment is short-term and occurs as people transition between jobs.

The natural rate of unemployment includes all of the following EXCEPT:

• Structural unemployment

• Frictional unemployment

• Seasonal unemployment

• Cyclical unemployment

Answer explanation

Explanation: The natural rate excludes cyclical unemployment, which is caused by fluctuations in economic activity.

Which of the following is a social cost of unemployment?

• Decrease in tax revenue

• Loss of personal income

• Increased crime rates

• Decline in economic growth

Answer explanation

Explanation: Unemployment can lead to social issues like higher crime rates due to financial stress and social exclusion.

If 5 million people are unemployed and the labor force is 50 million, the unemployment rate is:

• 5%

• 10%

• 15%

• 20%

Answer explanation

Explanation: Unemployment rate = (Unemployed ÷ Labor force) × 100 = (5 ÷ 50) × 100 = 10%.

If the unemployment rate increases from 5% to 8%, and the labor force remains constant at 60 million, how many more people are unemployed? This formula was not given in class, but you shall know it. Apply this formula: Labor force × (New rate - Old rate)

• 1.8 million

• 1.5 million

• 2 million

• 3 million

Answer explanation

Explanation: Change in unemployment = Labor force × (New rate - Old rate) = 60 × (0.08 - 0.05) = 1.8 million.

If the labor force participation rate is 70% and the working-age population is 200 million, the labor force is:

• 70 million

• 140 million

• 200 million

• 150 million

Answer explanation

Explanation: Labor force = Working-age population × Participation rate = 200 × 0.7 = 140 million.

If structural unemployment accounts for 3%, frictional unemployment for 2%, and seasonal unemployment for 1%, the natural rate of unemployment is:

• 3%

• 5%

• 6%

• 7%

Answer explanation

Explanation: Natural rate = Structural + Frictional + Seasonal = 3% + 2% + 1% = 6%.

The unemployment rate decreases from 10% to 8%, and the labor force is 50 million. How many people found jobs? This formula was not given in class, but you shall know it. Apply this formula: Labor force × (Old rate - New rate)

• 1 million

• 2 million

• 3 million

• 4 million

Answer explanation

Explanation: Change in unemployment = Labor force × (Old rate - New rate) = 50 × (0.10 - 0.08) = 2 million.