Labour market (plus unemployment)

1. Structural unemployment may be reduced by: a. increasing labour mobility. b.

increasing net exports; c. diminishing investments; d. increasing interest rates; a and c

2. According to the classical model of the economy, unemployment is generated when

the wage rate is above its equilibrium level in the: a. capital market; b. labour market;
c. government budget; d. aggregate economy; e. all of the above

3. The labour force is composed of those who are: a. employed and those not working; b.
unemployed and those who are looking for work; c. employed plus children; d.
employed plus foreign people; e. employed plus those who are looking for work

4. Unemployment resulting from the normal workings of the labour market is a

combination of : a. frictional and structural unemployment; b. frictional and cyclical
unemployment; c. structural and cyclical unemployment; d. cyclical and abnormal
unemployment; e. none of the above

5. A homemaker would be counted as: a. employed; b. unemployed; c. self-employed; d.

not in the labour force; e. a and c

6. The natural rate of unemployment is: a. the unemployment rate during recessions; b.
the unemployment rate during booms; c. the unemployment rate during business
cycles; d. the unemployment rate when real and nominal GDP are equal; e. the
unemployment rate when real and potential GDP are equal

7. Frictional unemployment refers to: a. unemployment related to business cycles; b.

unemployment related to immigration; c. unemployment related to labour market
inefficiencies; d. unemployment that takes place because of ordinary labour turnover;
e. all of the above

8. For an economy operating at full capacity the unemployment rate equals: a. the
cyclical rate of unemployment; b. the frictional rate of unemployment; c. the structural
rate of unemployment; d. zero; e. b and c

9. Which of the following is the best example of unemployed person: a. a person without
a job; b. a person looking for a job; c. a person working part-time; d. a homemaker; e.
a person without a job but looking for a job

10. Cyclical unemployment can be best described as: a. unemployment when real and
potential GDP are equal; b. unemployment when real and nominal GDP are equal; c.
the unemployment rate during boom periods; d. unemployment associated to the lack
of skills of workers; e. the increase in unemployment above the natural rate during and
after recessions

11. Which of the following expressions represents the unemployment rate: a.

employed+unemployed; b. labour force+not in labour force; c. labour
 force/population; d. employed/(employed+unemployed); e.
unemployed/(employed+unemployed)

12. If somebody is prepared to work at the current wage rate but cannot find a job, they
are victims of: a. frictional unemployment; b. classical unemployment; c. structural
unemployment; d. voluntary unemployment; e. involuntary unemployment

13. We would expect the size of the labour force to be ___ than the number of workers
willing to accept jobs at any real wage rate: a. smaller; b. larger; c. the same size; d.
double; e. half

14. Persons made redundant because of the contraction of an industry if a victim of: a.
structural unemployment; b. frictional unemployment; c. voluntary unemployment; d.
zero unemployment; e. high unemployment

15. Which of the following are economic consequences of unemployment: a. rising prices;
b. decline in real national output and income; c. rise in real national output and
income; d. confident investors; e. a b and d

16. If the real output in the economy increased, we would expect: a. an increase in
unemployment; b. a decrease in unemployment; c. a decrease in profits; d.
hyperinflation; e. an increase in the natural rate of unemployment

17. The close-down of a company due to recession generates: a. seasonal unemployment;

b. cyclical unemployment; c. technological unemployment; d. frictional
unemployment; e. structural unemployment

18. The labour force participation rate can be expressed as: a. population-labour force; b.
number of unemployed/labour force; c. labour force/population; d. natural rate of
unemployment; e. population/labour force

19. If the minimum wage is below the equilibrium wage: a. there is no inflation; b. there is
hyperinflation; c. there is labour supply surplus; d. there is labour demand surplus; e.
none of the above

20. Labour demand is: a. inelastic on the short term; b. elastic on the long term; c. unitary
elastic irrespective of the time horizon; d. perfectly elastic; e. a and b

21. A university graduate looking for a job but not having found one yet is: a. voluntary
unemployed; b. employed; c. frictionally unemployed; d. technologically unemployed;
e. unemployed because of lack of skills

22. The labour supply curve will shift to the right when: a. women quit their jobs; b.
people retire; c. women and students enter the labour market, willing to work; d. work
is replaced by capital; e. a and d

23. If demand for goods and services produced mainly using labour force diminishes: a.
labour demand will increase; b. inflation will rise; c. unemployment will diminish; d.
 labour is underpaid as compared to neighbouring countries; e. labour demand will
diminish

24. If demand for carpets increases then labour demand from companies producing carpets
will: a. increase; b. decrease; c. stay constant; d. decrease and then increase; e. cannot
say

25. Salary differences occur due to: a. the equality between the income and substitution
effects; b. reduced mobility of the labour force; c. high mobility of the labour force; d.
equal working conditions; e. security at work

26. Which of the following is not true about labour demand: a. represents the need for
paid for work; b. comes from companies; c. can be expressed as the number of jobs; d.
depends on labour productivity; e. expresses the number of persons willing to work

27. The size of labour demand does not depend on: a. the salary levels; b. the phase of the
economic cycle; c. total investments; d. the firms’ economic performance; e. the active
population

28. If labour demand and supply were equal: a. there would be no unemployment; b. there
would be no natural unemployment; c. there would be only frictional unemployment;
d. there would be only structural unemployment; e. none of the above

29. If demand for dentists diminishes: a. the salary and employment among dentists
diminish both; b. the salary and employment among dentists increase both; c. the
salary and employment among dentists stay the same; d. cannot say; e. all of the above

30. A person working in constructions and losing his job in winter is a victim of: a.
frictional unemployment; b. structural unemployment; c. seasonal unemployment; d. a
and b; e. none of the above

31. Unemployment occurs when: a. demand for labour is lower than supply for labour; b.
demand for labour is higher than supply for labour; c. demand and supply for labour
are equal; d. there is demand excess for labour; e. all of the above

32. The perception that wages are too low determines: a. a decrease in the labour demand;
b. involuntary unemployment; c. disinflation; d. voluntary unemployment; e. c and d

33. Involuntary unemployment was coined by: a. D. Ricardo; b. P.Samuelson; c. A.Smith;

d. G.Mankiw; e. J.M.Keynes

34. The inverse relation between unemployment and inflation is expressed by: a. Lorentz
curve; b. Friedman curve; c. Laffer curve; d. Phillips curve; e. production possibilities
curve

35. Okun law: a. refers to the relation between unemployment and output; b. Y full employment-
Yactual=-μ(uactual-unatural rate); c. refers to indirect taxes; d. is the same as the law of
demand; e. a and b
36. The steady rate of unemployment depends on: a. job separation; b. job finding; c. job
refusing; d. a and b; e. a, b and c

37. The steady rate of unemployment: a. is directly proportional to job separation rate; b.
is inversely proportional to the difference between job separation and job finding
rates; c. is inversely proportional to the sum of job separation and job finding rates; d.
a and b; e. a and c

38. The steady rate of unemployment can be written as: a. s/f; b. f/s; c. s/(s+f); d. (s+f)/s;
e. fs/(f+s)

39. Labour market is not in equilibrium due to: a. different preferences and abilities, as
well as different job attributes; b. imperfect information about job candidates and job
vacancies; c. non-instantaneous geographical mobility; d. all of the above; e. none of
the above

40. Because it takes time to find a job: a. frictional unemployment arises; b. structural
employment arises; c. seasonal employment arises; d. a and b; e. a and c

41. Frictional unemployment is altered by: a. willingness to work; b. unemployment

insurance; c. unemployment rate; d. inflation rate; e. none of the above

42. The change in composition of demand among industries and sectors (sectoral shifts) is
a cause for: a. frictional unemployment; b. structural employment; c. seasonal
employment; d. a and b; e. a and c

43. What are the causes of structural employment: a. wage rigidity; b. minimum wage
laws; c. unions and collective bargaining; d. efficiency wages; e. all of the above.