AP Macro Unemployment 3 — Questions and Answers
Question 1: Seasonal unemployment is best described as unemployment that results from:
- Permanent changes in the structure of the economy
- Regular and predictable fluctuations in labor demand across seasons (Correct answer)
- Workers voluntarily switching jobs
- Recessions reducing overall demand for labor
Correct answer: Regular and predictable fluctuations in labor demand across seasons
Seasonal unemployment arises from predictable, recurring changes in labor demand tied to seasons or holidays.
Question 2: According to most economists, which type of unemployment is included in the natural rate?
- Cyclical unemployment only
- Frictional and structural unemployment (Correct answer)
- Structural and cyclical unemployment
- Seasonal and cyclical unemployment
Correct answer: Frictional and structural unemployment
The natural rate of unemployment includes frictional and structural unemployment but NOT cyclical unemployment.
Question 3: If Congress passes a law significantly raising the minimum wage above the equilibrium wage, the likely result is:
- A decrease in structural unemployment
- A decrease in cyclical unemployment
- An increase in unemployment due to a labor surplus (Correct answer)
- An increase in the labor force participation rate
Correct answer: An increase in unemployment due to a labor surplus
A binding minimum wage above equilibrium creates a surplus of labor (quantity supplied exceeds quantity demanded), raising unemployment.
Question 4: Which of the following would cause the natural rate of unemployment to DECREASE?
- A prolonged recession
- Improved job-matching technology reducing search time (Correct answer)
- An increase in extended unemployment benefits duration
- A shift from manufacturing to a service economy
Correct answer: Improved job-matching technology reducing search time
Better job-matching technology reduces frictional unemployment, lowering the natural rate.
Question 5: Underemployment differs from unemployment in that underemployed workers are:
- Not in the labor force
- Working part-time involuntarily or in jobs below their skill level (Correct answer)
- Counted separately in the CPI
- Receiving unemployment insurance benefits
Correct answer: Working part-time involuntarily or in jobs below their skill level
Underemployed workers are employed but in positions that do not fully utilize their skills or desired hours.
Question 6: During a severe recession, which type of unemployment rises MOST sharply?
- Frictional
- Structural
- Seasonal
- Cyclical (Correct answer)
Correct answer: Cyclical
Cyclical unemployment rises sharply during recessions as falling aggregate demand reduces the overall demand for labor.
Question 7: An expansionary fiscal policy is most effective at reducing which type of unemployment?
- Structural unemployment
- Frictional unemployment
- Cyclical unemployment (Correct answer)
- Seasonal unemployment
Correct answer: Cyclical unemployment
Expansionary fiscal policy boosts aggregate demand, which directly addresses cyclical unemployment caused by insufficient demand.
AP Macro Unemployment 3
Seasonal unemployment is best described as unemployment that results from: