Unemployment Flashcards

The labor force participation rate is calculated as:

Answer: Labor force ÷ working-age population × 100

The labor force participation rate measures the share of the working-age population that is either employed or actively seeking work.

Which scenario represents someone moving from out of the labor force into unemployment?

Answer: A stay-at-home parent who starts actively searching for a job but hasn't found one

When someone previously outside the labor force begins actively job searching without finding work, they enter the labor force as unemployed.

Hysteresis in unemployment theory suggests that:

Answer: Prolonged high unemployment can permanently raise the natural rate

Hysteresis occurs when long-term unemployed workers lose skills or become discouraged, persistently raising the natural rate.

Which of the following is the best example of frictional unemployment?

Answer: A college graduate searching for her first professional job

A college graduate searching for a first job is frictionally unemployed — the unemployment stems from the search process, not skill mismatch or low demand.

If the unemployment rate equals the natural rate of unemployment, then cyclical unemployment equals:

Answer: Zero

By definition, when actual unemployment equals the natural rate, the cyclical component (excess above natural) equals zero.

Which of the following would be counted as EMPLOYED in the Bureau of Labor Statistics monthly survey?

Answer: Both A and B

BLS counts as employed both workers on temporary layoff with recall dates and anyone who worked even one hour for pay in the reference week.

Which combination correctly identifies the relationship between GDP and unemployment?

Answer: Rising GDP is associated with falling unemployment (Okun's Law)

Okun's Law states that each 1% rise in unemployment above the natural rate corresponds to roughly a 2% negative output gap.