Exercise 2 Answer KeyChapter 8 Unemployment and Inflation8.1 Measuring the Unemployment Rate and the Labor Force Participation Rate1) The Bureau of Labor Statistics would categorize a retiree who is not working asA) employed.B) unemployed.C) a discouraged worker.D) out of the labor force.Answer: DComment: RecurringDiff: 1 Page Ref: 640/236Topic: The Household SurveyObjective: LO1: Define unemployment rate and labor force participation rate and understand how they are computed.AACSB: Reflective ThinkingSpecial Feature: None2) Suppose that homemakers are included as employed in the labor force statistics, rather than being counted as out of the labor force. This would A) increase the measured unemployment rate.B) increase the measured labor force participation rate.C) decrease the number of persons in the labor force.D) decrease the number of persons in the working-age population.Answer: BDiff: 3 Page Ref: 642/238Topic: Labor Force ParticipationObjective: LO1: Define unemployment rate and labor force participation rate and understand how they are computed.AACSB: Reflective ThinkingSpecial Feature: Solved Problem: What Happens if You Include the Military?Table 8-1Total population 20,000Working-age population 15,000Employment 1,000Unemployment 100Consider the data above for a simple economy.3) Refer to Table 8-1. The unemployment rate for this simple economy equalsA) (100/1,000) × 100.B) (100/1,100) × 100. (unemployment rate is the percentage of the labor force that isunemployed, i.e. unemployment rate = # of unemployed workers/(# of employedworkers + # of unemployed workers)*100.)C) (100/15,000) × 100.D) (100/20,000) × 100.Answer: BComment: RecurringDiff: 2 Page Ref: 641/237Topic: The Unemployment RateObjective: LO1: Define unemployment rate and labor force participation rate andunderstand how they are computed.AACSB: Analytic SkillsSpecial Feature: None4) Refer to Table 8-1. The labor force participation rate for this simple economyequalsA) (1,000/1,100) × 100.B) (1,000/15,000) × 100.C) (1,100/15,000) × 100. (Recall that labor force participation rate is the percentage ofthe working-age population in the labor force, i.e.labor force participation rate=labor force / working-age population * 100 =(1,100/15,000)*100)D) (1,100/20,000) × 100.Answer: CComment: RecurringDiff: 2 Page Ref: 641/237Topic: Labor Force ParticipationObjective: LO1: Define unemployment rate and labor force participation rate andunderstand how they are computed.AACSB: Analytic SkillsSpecial Feature: None5) Suppose the labor force stays constant, and the working-age population staysconstant, but a greater number of persons who were unemployed become employed.The labor force participation rate will A) increase.B) decrease.C) remain constant. (Recall that labor force participation rate is the percentage of theworking-age population in the labor force. Here both numerator and denominatorremain unchanged. However, the unemployment rate will decrease in this case. Why?)D) not change in a way that can be predicted.Answer: CComment: RecurringDiff: 2 Page Ref: 641/237Topic: Labor Force ParticipationObjective: LO1: Define unemployment rate and labor force participation rate andunderstand how they are computed.AACSB: Reflective ThinkingSpecial Feature: None6) Suppose the government launches a successful advertising campaign that convincesworkers with high school degrees to quit their jobs and become full time college students. This would cause A) the unemployment rate to decrease. (these workers are not unemployed since they are not actively looking for work but become full time students. So the unemployed remains unchanged. However, the employed decreases. As a result, the unemploymentrate increases.)B) the labor force participation rate to decrease. (these workers are still working-age populations even though they quit their jobs. However, the labor force decreases. As aresult, labor force participation rate will decrease.)C) the number of discouraged workers to increase. (these workers are not discouragedworkers since they are convinced by the government to quit their jobs.)D) no change in the unemployment rate.Answer: BComment: RecurringDiff: 3 Page Ref: 641/237Topic: Labor Force ParticipationObjective: LO1: Define unemployment rate and labor force participation rate and understand how they are computed.AACSB: Analytic SkillsSpecial Feature: None7) Which of the following labor market statistics best indicates the amount of labor that is available to the economy from a given working-age population?A) unemployment rateB) discouraged-worker ratioC) labor force participation rateD) the ratio of minimum wage to inflationAnswer: CComment: RecurringDiff: 1 Page Ref: 641/237Topic: Labor Force ParticipationObjective: LO1: Define unemployment rate and labor force participation rate and understand how they are computed.AACSB: Reflective ThinkingSpecial Feature: None8) Which of the following cause the unemployment rate as measured by the Bureau ofLabor Statistics to overstate the true extent of joblessness?A) inflationB) discouraged workersC) counting people as employed who are working part time, although they would prefer to be working full timeD) unemployed persons falsely report themselves to be actively looking for a job Answer: DComment: RecurringDiff: 2 Page Ref: 642-643/238-239Topic: Problems with Measuring the Unemployment RateObjective: LO1: Define unemployment rate and labor force participation rate and understand how they are computed.AACSB: Reflective ThinkingSpecial Feature: None9) Since 1948, the labor force participation rate for adult men has ________ and for adult women has ________.A) increased; increasedB) increased; decreasedC) decreased; increasedD) decreased; decreasedAnswer: CComment: RecurringDiff: 1 Page Ref: 643-644/239-240Topic: Labor Force ParticipationObjective: LO1: Define unemployment rate and labor force participation rate and understand how they are computed.Special Feature: None10) In the modern U.S. economy, the typical unemployed person stays unemployed forA) a relatively long time, over a year.B) a relatively short time, less than six months.C) for a long time during expansions and short time during recessions.D) an amount of time that is hard to quantify.Answer: BComment: RecurringDiff: 1 Page Ref: