Econ 102
Week 3 Tutorial
Sample Questions
1. The following numbers come from the Bureau of Labor Statistics web page
(http://data.bls.gov/). They represent population and unemployment data for 2011. Use the
data to answer the following:
Population (non-institutional)
Population (15 years old and over)
Labor Force
Unemployed
Number surveyed (15+ years old)
311,591,900
239,618,000
153,617,000
13,747,000
486,000
i) How many people are working in the US?
ii) What is the unemployment rate?
iii) What is the Labor Participation Ratio for the US?
iv) What is a discouraged worker?
v) What percentage of adults were surveyed by BLS in 2011?
vi) Which people are included in the population, but are not included in the labor force?
2. What are the costs and benefits of unemployment insurance?
3. “When there is full employment, everyone who wants a job can find one.” Is this
statement true or false, explain. Include a definition of full employment in your answer.
4. Explain what is under-employment. How does under-employment bias the unemployment
rate downward.
5. Why is the natural rate of unemployment different in different countries?
6. What are the three types of unemployment? Which of these was affected by the latest
economic crisis?
7.
Sample Questions: Unemployment
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Econ 102
Week 3 Tutorial
KEY
1. The following numbers come from the State Institute of Statistics web page
(www.tuik.gov.tr). They represent population and unemployment data for November 2011.
Use the data to answer the following:
Population (non-institutional)
Population (15 years old and over)
Labor Force
Unemployed
Number surveyed (15+ years old)
72,826,000
54,027,000
26,696,000
2,429,000
95,371
i) How many people are working in Turkey?
Labor Force = employed + unemployed, but actively seeking work.
Therefore we can find the number of workers by:
Employed = 26,696,000 – 2,429,000 = 24,267,000
ii) What is the unemployment rate?
The unemployment rate is the ratio of unemployed to the Labor Force:
u
2, 429, 000
 100%
26, 696, 000
 9.1%
iii) What is the Labor Participation Ratio for Turkey?
For the over age 15 group it is this is the ratio of labor force to population:
u
26, 696, 000
54, 027, 000
 0.4941 :
iv) What is a discouraged worker?
A discouraged worker is one who has been unemployed for so long that he or she
is no longer actively seeking work even though they would like to be working.
Discouraged workers are not included in the labor force or in the unemployment
rate.
v) What percentage of adults were surveyed by TUIK in November?
Again, over 15 years old, we see the ratio:
95371
54, 027, 000
 0.0018 . About 18 out of 10,000
adults or 1 out of 566 people.
vi) Which people are included in the population, but are not included in the labor
force?
These are people not working and not seeking work. This list includes children,
housewives/househusbands, disabled, retired, students, and discouraged workers.
2. What are the costs and benefits of unemployment insurance?
The benefit of unemployment insurance is that it spreads the cost of unemployment
across all workers instead of falling very hard on the few workers unlucky enough to
become unemployed.
The cost of unemployment insurance is that it tends to increase the natural rate of
unemployment by giving a disincentive to work by taxing wages and by giving a
disincentive
Sample Questions: Unemployment
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3. “When there is full employment, everyone who wants a job can find one.” Is this
statement true or false, explain. Include a definition of full employment in your answer.
This statement is false. Full employment means that there is no cyclical
unemployment, however there can still be people who are in between jobs (frictional
unemployment) and people without the skills in demand in the marketplace
(structural unemployment).
4. Explain how under-employment can bias the unemployment rate downward. What is
under-employment?
Under-employment is the problem of workers who are working below their full
potential. This includes people who are working less than full-time who would like to
be working full-time, and people with education or skills who are working in a job
below their skill level. These workers are included in the labor force as employed
workers. Therefore the unemployment rate does not represent this inability of the
economy to fully employ all workers.
5. Why is the natural rate of unemployment different in different countries?
The natural rate of unemployment includes frictional and structural unemployment.
Frictional and structural unemployment may be different in different countries. The
level of unemployment benefits and labor-based taxes affects the incentive to work
and to find work quickly when unemployed. This affects the level of frictional
unemployment. These benefits are different in different countries. Also the level of
economic development and the education and skill level of workers is different in
different countries.
6. What are the three types of unemployment? Which of these was affected by the latest
economic crisis?
The three types of unemployment are:
1) frictional – those in-between jobs
2) structural – those that who are unemployed because they lack skills for the
available jobs or who live in an underdeveloped area with too few available jobs
3) cyclical – those who are unemployed because of a temporary downturn in the
economy
The recent crises was a deep recession. The slowdown of the economy caused
cyclical unemployment, by definition.
Sample Questions: Unemployment
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