AP Macroeconomics chapter practice15 questions

08 Employment, Unemployment, and the Labor Force

These questions come directly from the chapter practice in the book. Choose the best answer, check your reasoning, and use the explanation to correct any gap.

Question 1

Question 1 of 15

Official statistics divide the adult noninstitutional population into three categories before any rate is computed. The labor force is measured as

The labor force is the employed plus people who are out of work and actively looking. Choice A leaves a residual that includes everyone not searching, C and D fold in adults who are not in the market at all, and E subtracts a group that was never counted in the total.
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B. the employed plus those actively seeking work

The labor force is the employed plus people who are out of work and actively looking. Choice A leaves a residual that includes everyone not searching, C and D fold in adults who are not in the market at all, and E subtracts a group that was never counted in the total.

Question 2

Question 2 of 15

An adult without a job has not looked for work in several months. Which of the following gives that person's official classification?

Active search during the reference period separates the unemployed from people outside the labor force, and no search happened here. Choice A counts past work as current employment, B drops the search requirement, D applies a type label that still presumes search, and E confuses the payroll survey with the household survey that produces this classification.
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C. Outside the labor force entirely

Active search during the reference period separates the unemployed from people outside the labor force, and no search happened here. Choice A counts past work as current employment, B drops the search requirement, D applies a type label that still presumes search, and E confuses the payroll survey with the household survey that produces this classification.

Question 3

Question 3 of 15

In Country X, 225 people are employed and 25 people are unemployed and actively searching. The unemployment rate is

The labor force is 225+25=250, so the rate is (25)/(250)=0.10. Choice A counts the unemployed a second time in the denominator and lands near 9 percent, C divides by the employed alone, D reports the count of unemployed people as if it were already a rate, and E reports the employed share.
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B. 10 percent

The labor force is 225+25=250, so the rate is (25)/(250)=0.10. Choice A counts the unemployed a second time in the denominator and lands near 9 percent, C divides by the employed alone, D reports the count of unemployed people as if it were already a rate, and E reports the employed share.

Question 4

Question 4 of 15

A worker has left one position and is searching for a better match. That unemployment is classified as

Ordinary movement between jobs while searching is what frictional unemployment names. Choice A needs a mismatch between skills and openings, B needs an economy-wide downturn, C needs a calendar pattern, and D forgets that an active searcher is still inside the labor force.
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E. frictional unemployment

Ordinary movement between jobs while searching is what frictional unemployment names. Choice A needs a mismatch between skills and openings, B needs an economy-wide downturn, C needs a calendar pattern, and D forgets that an active searcher is still inside the labor force.

Question 5

Question 5 of 15

A typist loses a job because firms adopt new software, and the remaining openings require skills the worker lacks. How is this unemployment classified?

New software left this worker's skills mismatched with the openings that remain, and that mismatch is structural. Choice B describes routine search, C requires a fall in overall demand, D requires a calendar pattern, and E applies a label for people working below their skill level, which is not what happened here.
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A. Structural unemployment

New software left this worker's skills mismatched with the openings that remain, and that mismatch is structural. Choice B describes routine search, C requires a fall in overall demand, D requires a calendar pattern, and E applies a label for people working below their skill level, which is not what happened here.

Question 6

Question 6 of 15

A recession closes restaurants across a city, and the displaced workers find no comparable openings. What type of unemployment results?

The closures trace back to a fall in economy-wide spending, so the job losses are cyclical. Choices A and B name the unemployment that persists even at potential output, C names the sum of those two and so excludes the downturn entirely, and E requires a predictable yearly pattern.
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D. Cyclical unemployment

The closures trace back to a fall in economy-wide spending, so the job losses are cyclical. Choices A and B name the unemployment that persists even at potential output, C names the sum of those two and so excludes the downturn entirely, and E requires a predictable yearly pattern.

Question 7

Question 7 of 15

Full employment does not mean that every worker holds a job. Which of the following describes the labor market at full employment?

Full employment leaves ordinary search and mismatch in place; what disappears is the unemployment caused by deficient demand. Choices A, B, and C each erase unemployment that survives at potential output, and E confuses holding a job with being in the labor force.
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D. Cyclical unemployment is zero.

Full employment leaves ordinary search and mismatch in place; what disappears is the unemployment caused by deficient demand. Choices A, B, and C each erase unemployment that survives at potential output, and E confuses holding a job with being in the labor force.

Question 8

Question 8 of 15

Unemployed workers stop searching and are no longer counted as job seekers. Which of the following happens to the measured rates?

Dropping out removes these people from the unemployed count and from the labor force at once, so participation falls and the measured unemployment rate falls with it. Choices B, C, and D each move one of the two rates the wrong way, and E overlooks that the denominator itself shrank.
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A. Both the unemployment rate and participation fall.

Dropping out removes these people from the unemployed count and from the labor force at once, so participation falls and the measured unemployment rate falls with it. Choices B, C, and D each move one of the two rates the wrong way, and E overlooks that the denominator itself shrank.

Question 9

Question 9 of 15

The adult noninstitutional population of Country X is 400 and its labor force is 260. The participation rate is

Participation is (260)/(400)=0.65. Choice A misplaces the decimal, B divides by 1,000 rather than 400, C reports the 140 people outside the labor force as a share of the population, and D divides those same 140 by the labor force of 260.
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E. 65 percent

Participation is (260)/(400)=0.65. Choice A misplaces the decimal, B divides by 1,000 rather than 400, C reports the 140 people outside the labor force as a share of the population, and D divides those same 140 by the labor force of 260.

Question 10

Question 10 of 15

Standard labor statistics classify each adult using a reference week. Which of the following people is counted as employed?

Any paid work during the reference week counts as employment, however few the hours. Choice A describes someone unemployed rather than employed, B describes unpaid work, which the survey does not count, and C and D describe people outside the labor force, one who has not begun searching and one no longer looking.
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E. A person who worked one paid hour that week

Any paid work during the reference week counts as employment, however few the hours. Choice A describes someone unemployed rather than employed, B describes unpaid work, which the survey does not count, and C and D describe people outside the labor force, one who has not begun searching and one no longer looking.

Question 11

Question 11 of 15

The natural rate of unemployment is the rate that remains when output equals potential. It consists mainly of

At potential output what remains is the unemployment created by job search and by mismatch between skills and openings. Choice A names the component that disappears there, B and E name subgroups rather than the concept, and D counts adults who never entered the labor force.
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C. frictional and structural unemployment

At potential output what remains is the unemployment created by job search and by mismatch between skills and openings. Choice A names the component that disappears there, B and E name subgroups rather than the concept, and D counts adults who never entered the labor force.

Question 12

Question 12 of 15

Which of the following makes a falling unemployment rate a misleadingly strong signal about the labor market?

When searchers give up they leave the numerator and the denominator together, so the rate improves without a single extra person working. Choices A and C describe genuine hiring, B describes an ordinary price adjustment, and E describes a condition present even at potential output rather than a measurement problem.
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D. Searchers give up and leave the labor force.

When searchers give up they leave the numerator and the denominator together, so the rate improves without a single extra person working. Choices A and C describe genuine hiring, B describes an ordinary price adjustment, and E describes a condition present even at potential output rather than a measurement problem.

Question 13

Question 13 of 15

A worker is laid off for two weeks while a plant retools and expects to be recalled. This spell is best classified as

The layoff is short, the recall is expected, and no downturn is involved, which places it with ordinary transitional unemployment. Choice A needs a contraction, B needs skills that no longer sell, D needs a calendar pattern, and E forgets that a worker awaiting recall is still counted as unemployed.
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C. frictional unemployment during a short transition

The layoff is short, the recall is expected, and no downturn is involved, which places it with ordinary transitional unemployment. Choice A needs a contraction, B needs skills that no longer sell, D needs a calendar pattern, and E forgets that a worker awaiting recall is still counted as unemployed.

Question 14

Question 14 of 15

Employment rises by 10 and unemployment falls by 10, with the adult population unchanged. The participation rate

The same ten people moved from the unemployed column to the employed column, so neither the labor force nor the population changed. Choices B and C each follow one side of the move and ignore the other, and D and E attach a percentage-point change to a ratio whose numerator and denominator both held still.
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A. does not change

The same ten people moved from the unemployed column to the employed column, so neither the labor force nor the population changed. Choices B and C each follow one side of the move and ignore the other, and D and E attach a percentage-point change to a ratio whose numerator and denominator both held still.

Question 15

Question 15 of 15

Which of the following statistics best complements the unemployment rate when many people may have stopped searching?

Participation shows whether people left the labor force rather than found work, which is exactly the ambiguity a falling unemployment rate creates. Choices A and D track prices and credit, C tracks pay rather than who is looking, and E can rise while workers are still leaving the market.
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B. The participation rate

Participation shows whether people left the labor force rather than found work, which is exactly the ambiguity a falling unemployment rate creates. Choices A and D track prices and credit, C tracks pay rather than who is looking, and E can rise while workers are still leaving the market.

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