Chapter 6: Quiz Answers -- Unemployment

1. The BLS conducts a survey each month to determine unemployment rates. To determine the unemployment rate, the BLS classifies survey respondents into any of these categories except:
   part-time worker. Although a part-time worker is a valid classification for other parts of the Current Population Survey, it is a sub-classification of someone that is employed. Whether an invidual works part-time or full-time, he is still counted as employed.

2. Which of the following people would be counted as officially employed?
   Brandy worked one hour for pay the week of the survey week, but then was laid off. Brandy is employed because she did work for pay during the survey week, even if it was only for one hour. JoAnn is classified as not in the labor force because she did not work for more than 15 hours without pay in her family business. Javier was classified as unemployed.

3. To be counted as unemployed which of the following criteria must be true?
   All of the above.

4. Which of the following people would be classified as officially unemployed?
   Ken was laid off last week from his job. He made phone calls to potential new employers this week. However, Ken does not qualify for unemployment insurance. Darryl is considered employed if he was paid for any work done during the week of the survey. (See BLS faqs.) Diane did not actively seek work (i.e. she made no phone calls for filled out no applications), so she is considered not in the labor force. Ken is unemployed because he is out of work and is actively seeking unemployment. Barbara is a discouraged worker because she has given up looking for a job.

5. Suppose the BLS conducted a monthly survey of 1,000 individuals, and found that 400 are employed, 100 are unemployed, and 500 are not in the labor force. From this information, which of the following statements is false?
   The unemployment rate is 10 percent. In fact, the unemployment rate is 20 percent ((100/500)*100).

6. Critics complain that the unemployment rate understates the true unemployment rate because
   Only (b) and (c) (i.e. the second and third choices listed here). The first multiple choice--people only have to say they are actively seeking work--is a factor that potentially overstates the true unemployment rate.

7. Jane is laid off from her work because the firm is moving to Mexico. Jane is
   structurally unemployed. Jane is laid off because of a structural shift in the economy. The job was lost due to the law of comparative advantage. The job is not likely to return to the U.S. for quite some time, if at all.

8. The natural rate of unemployment is currently estimated to be between
   5 and 5.5 percent. This range is an estimate, however. The experience of the U.S. economy between about 1995 and 2001 suggests that the natural rate of unemployment may be even lower. The jury is still out on this question.

9. Unemployment rates are counter-cyclical and increase when the economy goes into recession, but they are not continually increasing.
   True. Unemployment rates rise when the economy's level of production falls, and vice versa. Unemployment rates are not continually rising over time.

10. Our unemployment rates are misleading because we only count those who are receiving unemployment insurance. But many of those who are unemployed do not receive unemployment insurance at all.
    False. Unemployment rates have nothing whatsoever to do with the number of people receiving unemployment insurance.