ECON104 Macroeconomics Analysis (Homework Ch 15)

ECON104 Macroeconomics Analysis (Homework Ch 15)
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  1. Measuring employment, unemployment, and labor force participation

Consider a small economy composed of six people: Jake, Latasha, Nick, Rosa, Alyssa, and Tim. Each person’s employment status is described in the following table.

Based on the criteria used by the Bureau of Labor Statistics (BLS), identify each person’s status as employed, unemployed, “not in the labor force” (if not in the civilian labor force but still part of the adult population), or “not in the adult population” if not in the civilian adult population.

PersonStatus
Jake is a 73-year-old professor. He teaches only one or two courses a year, but he’s still pursuing an active research agenda.   
Latasha is a 42-year-old autoworker who was just laid off by her employer. She is trying to find any kind of job to help make ends meet.   
Nick is a 45-year-old accountant who has been out of work for almost a year. He became so discouraged that he gave up on his job search a couple of months ago.   
Alyssa is a 29-year-old who lost her job as an associate producer for a radio station. After spending a few weeks out of work and interviewing for several other positions, she gave up on her job search and decided to go back to grad school. She made that decision a few months ago.   
Tim is a famous novelist. He is spending the summer at his lake house in upstate New York, doing a little writing each day but mostly spending his time gardening and reading. 
Rosa is a 10-year-old student at Southside Middle School. She babysits her younger sister and does other chores, so her parents give her an allowance of $30 per week.   

Complete the right half of the following equation to reflect the labor force participation rate reported by the BLS.

Labor Force Participation Rate = _______________________.

According to this formula, what is the labor force participation rate of this economy of six people?

33.33%

40%

50%

60%

Complete the right half of the following equation to reflect the unemployment rate reported by the BLS.

Unemployment Rate = ___________________________.

According to this formula, what is the unemployment rate of this economy of six people?

33.33%

40%

50%

60%

  1. Discouraged workers

Which of the following statements correctly describe discouraged workers? (If none of the choices apply, leave all of the checkboxes blank.) Check all that apply.

They are dissatisfied with their current jobs and are considering quitting.

They have not looked for a job in 4 weeks (or longer), but they would like a job and are available for work.

They are full-time workers who would like to work only part-time.

They have given up on looking for a job.

The following table contains U.S. employment information from July 2019.

Civilian PopulationEmployedUnemployedDiscouraged
(Persons 16 years old and over)(Persons)(Persons)(Persons)
259,225,000157,288,000 6,063,000368,000

The Bureau of Labor Statistics has several measures of joblessness in addition to the official unemployment rate. One alternative is the U-4 measure of labor underutilization, which is calculated as follows:

U-4U-4 =  =100×Unemployed+DiscouragedLabor Force + Discouraged100×Unemployed+DiscouragedLabor Force + Discouraged

Fill in the following table by calculating the official unemployment rate and the U-4 measure of labor underutilization.

Official Unemployment RateU-4 Measure of Labor Underutilization
(Percent)(Percent)
    ____________        _______________

The official unemployment rate and the U-4 measure of labor underutilization are two different measures of joblessness in the economy.

Excluding discouraged workers from the official unemployment rate may cause the official rate to ________ the true extent of underemployment.

  1. Types of unemployment

The three people described in the following table are categorized as unemployed by the Bureau of Labor Statistics.

Identify each person in the table as structurally, frictionally, or cyclically unemployed.

Unemployment TypeStructuralFrictionalCyclical
Automobile demand has fallen during a recent recession, and Maria has been laid off from her job on the assembly line.
Edison recently lost his job as a dishwasher. Minimum-wage legislation keeps employers from adding more of the low-skill positions for which he qualifies, so he has been unable to find work.
Hilary is a physician who has decided to relocate to California to be closer to her family. She is currently interviewing with several prestigious hospitals in the San Francisco Bay Area.

The following table shows data on frictional, cyclical, structural, and total unemployment for an economy.

Unemployment TypeRate
(Percent)
Frictional3.6
Cyclical0.0
Structural1.1
Total unemployment4.7

True or False: This economy is currently at its natural rate of unemployment.

True

False

  1. Sectoral shifts, frictional unemployment, and job searches

Suppose the world price of cotton falls substantially. The demand for labor among cotton-producing firms in Texas will _____. The demand for labor among textile-producing firms in South Carolina, for which cotton is an input, will _____. The temporary unemployment resulting from such sectoral shifts in the economy is best described as ______ unemployment.

Suppose the government wants to reduce this type of unemployment. Which of the following policies would help achieve this goal? Check all that apply.

Increasing the benefits offered to unemployed workers through the government’s unemployment insurance program

Improving a widely used job-search website so that it matches workers to job vacancies more effectively

Establishing government-run employment agencies to connect unemployed workers to job vacancies

 

  1. Minimum-wage laws and unemployment

Consider the market for labor depicted by the demand and supply curves that follow.

Use the calculator to help you answer the following questions. You will not be graded on any changes you make to the calculator.

Graph Input Tool

Market for Labor 
 

Wage (Dollars per hour)

 
Labor Demanded (Thousands of workers)Labor Supplied (Thousands of workers)

Complete the following table with the quantity of labor supplied and demanded if the wage is set at $12.50. Then indicate whether this wage will result in a shortage or a surplus.

Hint: Be sure to pay attention to the units used on the graph and in the table. For example, type in 100 for 100,000 workers.

WageLabor DemandedLabor SuppliedShortage or Surplus?
(Thousands of workers)(Thousands of workers)
$12.50_______________   

Suppose a senator considers introducing a bill to legislate a minimum hourly wage of $12.50.

Which of the following statements are true? Check all that apply.

In this labor market, a minimum wage of $9.50 would be binding.

Binding minimum wages cause structural unemployment.

In the absence of price controls, a surplus puts downward pressure on wages until they fall to the equilibrium.

If the minimum wage is set at $12.50, the market will not reach equilibrium.

  1. Contrasting labor union laws in two states

Consider two states that adopt different laws concerning labor unions.

The following graph shows the labor market in a state in the North. Initially, the market-clearing wage there is $8.00 per hour.

Suppose that the legislature in this northern state passes laws that make it easy for workers to join a union. Through collective bargaining, the union negotiates a wage of $10.00 per hour.

Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.

Graph Input Tool

Market for Labor 
 

Wage (Dollars per hour)

 
Labor Demanded (Thousands of workers)Labor Supplied (Thousands of workers)

Enter $10.00 into the box labeled Wage on the previous graph.

Hint: Be sure to pay attention to the units used on the graph.

At the union wage, _______ union workers will be employed.

The following graph shows the labor market in a state in the South. The legislature in this state passes strong “right-to-work” laws that make it very difficult for unions to organize workers, so the wage is always equal to the market-clearing value. Except for this difference in legislation, the two states are very similar.

The initial position of the graph corresponds to the initial labor market condition in the southern state before the labor union negotiated the new, higher wage for workers in the northern state.

Suppose that after the wage goes up in the northern state, some workers in the northern state lose their jobs and decide to move to the southern state.

 Adjust the graph to show what happens to employment and wages in the southern state.

Which of the following groups are better off as a result of the union action in the northern state? Check all that apply.

Workers who find new jobs in the southern state

The original workers in the southern state

Workers in the northern state employed at the union wage

All workers in the northern state

 

  1. The theory of efficiency wages

Why might some firms voluntarily pay workers a wage above the market equilibrium, even in the presence of surplus labor? Check all that apply.

Paying higher wages encourages workers to be more productive.

Paying higher wages increases worker turnover.

Paying higher wages enhances workers to adopt healthier lifestyles, enhancing their productivity.

Paying higher wages tends to reduce the average experience level of a firm’s workers.

 

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