Question 1

Suppose the adult population of a country is 30,000,000. Of these, 18,000,000 are employed and 2,000,000 are unemployed. What is the labour force participation rate?

$$	ext{LFPR} = \frac{	ext{Labour Force}}{	ext{Adult Population}} 	imes 100\%$$

Accepted Answer

$$66.7\%$$

Question 2

Which of the following best describes the natural rate of unemployment?

Accepted Answer

The unemployment rate when cyclical unemployment is zero

Question 3

A discouraged worker is someone who:

Accepted Answer

Is not in the labour force because they have stopped looking for work

Question 4

If the number of unemployed is 1,500,000 and the labour force is 20,000,000, what is the unemployment rate?

$$U = \frac{	ext{No. of unemployed}}{	ext{Labour Force}} 	imes 100\%$$

Accepted Answer

$$7.5\%$$

Question 5

Which of the following is an example of structural unemployment?

Accepted Answer

A factory worker who loses their job because their skills are no longer in demand

Question 6

Which policy is most likely to reduce frictional unemployment?

Accepted Answer

Providing better information about job vacancies

Question 7

Suppose the labour force in a country is 25,000,000 and the adult population is 40,000,000. If 2,000,000 people are unemployed, what is the employment-population ratio?

$$	ext{Employment-Population Ratio} = \frac{	ext{No. of Employed}}{	ext{Adult Population}} 	imes 100\%$$

Accepted Answer

$$57.5\%$$

Question 8

Which of the following is NOT a reason why the official unemployment rate may understate the true level of unemployment?

Accepted Answer

It includes people working 'under the table' as unemployed

Question 9

Which of the following would increase the natural rate of unemployment?

Accepted Answer

An increase in the generosity of employment insurance

Question 10

If the government introduces a new program that helps match workers with jobs more efficiently, what is the likely effect on unemployment?

Accepted Answer

Frictional unemployment will decrease

Question 11

Which of the following best explains why there is always some unemployment in a well-functioning economy?

Accepted Answer

Because frictional unemployment is inevitable due to sectoral shifts and job search

Question 12

A country has 50 million adults. 30 million are employed, 5 million are unemployed, and the rest are not in the labour force. What is the unemployment rate?

$$U = \frac{	ext{No. of unemployed}}{	ext{Labour Force}} 	imes 100\%$$

Accepted Answer

$$14.3\%$$

Question 13

Which of the following is most likely to cause structural unemployment?

Accepted Answer

Technological change that makes certain skills obsolete

Question 14

Which of the following statements about employment insurance (EI) is correct?

Accepted Answer

EI can increase the unemployment rate by reducing the incentive to search for work

Question 15

If the official unemployment rate is 7%, but there is a large number of discouraged workers, what does this imply?

Accepted Answer

The true level of labour underutilization is likely higher than 7%

Question 16

Which of the following would NOT be included in the labour force?

Accepted Answer

A retiree who is not seeking employment

Question 17

Suppose the government raises the minimum wage above the equilibrium wage. What is the likely effect on unemployment?

Accepted Answer

Structural unemployment will increase

Question 18

Which of the following is an example of cyclical unemployment?

Accepted Answer

A worker laid off during a recession

Question 19

If two-thirds of the unemployed are without work for less than three months, what does this suggest about the nature of unemployment?

Accepted Answer

Most unemployment is short-term and likely frictional

Question 20

Which of the following would NOT be considered a cause of structural unemployment?

Accepted Answer

Job search due to workers seeking better matches

Unemployment and Its Natural Rate: Concepts, Measurement, and Types

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