CEA Labor Economics and Human Capital 2

Question 1

Structural unemployment occurs when:

Accepted Answer

There is a persistent mismatch between workers' skills and the requirements of available jobs

Answer

Structural unemployment results from long-term changes in the economy — such as technological shifts or industry decline — that create skill or geographic mismatches between workers and openings.

Question 2

The 'discouraged worker effect' describes individuals who:

Accepted Answer

Stop actively searching for work because they believe no suitable jobs are available

Answer

Discouraged workers have withdrawn from active job search and are excluded from official unemployment statistics, causing measured unemployment to understate true labor market weakness.

Question 3

The insider-outsider theory of wage determination proposes that:

Accepted Answer

Currently employed workers (insiders) use bargaining power to maintain above-market wages at the expense of job seekers (outsiders)

Answer

The insider-outsider model shows that insiders exploit their position to keep wages high, creating entry barriers for outsiders and explaining persistent unemployment.

Question 4

Regarding on-the-job training, human capital theory predicts that:

Accepted Answer

General training costs are borne by workers while firm-specific training costs are shared between workers and employers

Answer

Because general skills benefit any employer, workers pay via lower wages during training; firm-specific skills benefit only the current employer, so costs and returns are shared.

Question 5

Skill-biased technological change (SBTC) is primarily associated with:

Accepted Answer

Rising wage inequality as technology increases relative demand for high-skilled labor

Answer

SBTC theory holds that new technologies complement high-skilled workers and substitute for low-skilled workers, widening the wage distribution and increasing earnings inequality.

(CEA) Certified Economic Analyst Practice Test

(CEA) Certified Economic Analyst Practice Test

CEA Labor Economics and Human Capital 2