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Unemployment Flashcards

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  1. Which of the following best explains why full employment does NOT mean zero unemployment?

    Answer: Frictional and structural unemployment always exist in a dynamic economy

    Even at full employment, frictional and structural unemployment persist because the economy is always changing and workers move between jobs.

  2. A decrease in unemployment benefits would most likely:

    Answer: Decrease frictional unemployment by shortening job searches

    Shorter benefit duration typically pressures workers to accept jobs sooner, reducing the average length of frictional unemployment.

  3. What happens to the official unemployment rate when discouraged workers re-enter the labor force but have not yet found jobs?

    Answer: It increases because more people are now counted as unemployed

    When discouraged workers resume job searching, they re-enter the labor force as unemployed, increasing both the numerator and denominator but raising the rate.

  4. Which of the following would shift the long-run Phillips curve to the LEFT (lower natural rate of unemployment)?

    Answer: Job training programs that reduce structural unemployment

    Job training programs reduce structural unemployment by better matching workers' skills to available jobs, permanently lowering the natural rate.

  5. Stagflation is problematic for policymakers because it creates a situation where:

    Answer: Reducing inflation would worsen unemployment and vice versa

    During stagflation, any policy to reduce inflation (contractionary) worsens unemployment, and any policy to reduce unemployment (expansionary) worsens inflation.

  6. Which group is included in the labor force?

    Answer: Part-time workers seeking full-time employment

    Part-time workers who want full-time work are counted as employed in the labor force; military, inmates, and retirees are excluded.

  7. According to the expectations-augmented Phillips curve, attempts to keep unemployment below the natural rate in the long run will result in:

    Answer: Accelerating inflation with no lasting reduction in unemployment

    Workers adjust inflation expectations upward, requiring ever-higher inflation to maintain unemployment below the natural rate, with no long-run gain.