CBE Labor Economics 4

Question 1

The natural rate of unemployment is defined as the rate of unemployment that:

Accepted Answer

Prevails when the labor market is in long-run equilibrium with no cyclical unemployment

Answer

The natural rate is the sum of frictional and structural unemployment present when the economy is at potential output, with no excess cyclical unemployment.

Question 2

A union wage premium refers to:

Accepted Answer

The difference between union members' wages and nonunion wages for comparable workers

Answer

The union wage premium measures how much more union members earn relative to similar nonunion workers, attributable to union bargaining power.

Question 3

According to the job search model, a higher unemployment insurance benefit is expected to:

Accepted Answer

Lengthen average unemployment spells by raising the reservation wage

Answer

More generous UI benefits reduce the cost of remaining unemployed, allowing workers to hold out for better job offers and extending spell duration.

Question 4

Which labor market outcome is most consistent with efficiency wage theory?

Accepted Answer

Wages set above market-clearing levels to reduce shirking and turnover

Answer

Efficiency wage theory argues firms pay above-equilibrium wages to motivate effort, reduce costly turnover, and attract higher-quality workers.

Question 5

The Oaxaca-Blinder decomposition is used in labor economics to:

Accepted Answer

Decompose wage gaps into explained and unexplained components

Answer

The Oaxaca-Blinder decomposition separates the raw wage gap between groups into a portion explained by productivity differences and an unexplained residual.

(CBE) Certified Business Economist Practice Test

(CBE) Certified Business Economist Practice Test

CBE Labor Economics 4