CH 10 PRACTICE PROBLEMS

CH 10 PROBLEMS:

#1 . The natural rate of unemployment is the
a. unemployment rate that would prevail with zero inflation.
b. rate associated with the highest possible level of GDP.
c. difference between the long-run and short-run unemployment rates.
d. amount of unemployment that the economy normally experiences.

ANS: D

#2 T/F Cyclical unemployment is closely associated with long term economic growth;

FALSE It is associated with fluctuations in the business cycle.

#3 Give an example of frictional unemployment associated with a sectoral shift.

The decrease in jobs in cassette manufacturers due to the introduction of CD’s.

#4 Why might European countries( like Germany) have higher rates of unemployment in the United States

Due to high levels of unemployment insurance.

#5 Why do firms pay efficiency wages? (SKIP)


#6 ) A minimum wage set above equilibrium results in?

INCREASE the quantity of labor SUPPLIED and DECREASE the quantity DEMANDED. This results in a SURPLUS or UNEMPLOYMENT. You should be able to demonstrate this with a graph