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Economic Theory

2. How is the unemployment rate calculated?
3. Are all adults who do not hold jobs considired as unemployed?
4. What happens to the unemployment rate when unemployed
workers are reclassified as discouraged workers?

5. What determines the natural rate of unemployment?
6. What is the difference between frictional unemployment and

structural unemployment?
7. Explain in your own words why the standard supply-and-demand
framework predicts zero unemployment when it is applied to the labor
market.

8. What wage is determined in labor market equilibrium – the real
wage or the nominal wage?
9. Many college students graduate from college before they have

found a job. When graduates begin to look for a job, they are counted as
what category of unemployed?
10. Assess whether the following would be counted as “unemployed”
in the Current Employment Statistics survey:

a) a husband willingly stays home with children while his wife works;
b) a manufacturing worker whose factory just closed down;
c) a college student doing an unpaid summer internship;

d) a retiree;
e) someone who has been out of work for two years but keeps looking
for a job;
f) someone who has been out of work for two months but isn’t

looking for a job;
g) someone who hates her present job and is actively looking for

another one;
h) someone who decides to take a part time job because she could not
find a full time position.

Multiple-Choice Questions

1. The existence of discouraged workers may present a problem in
determining the actual _____ rate.
a) unemployment;
b) income tax;

c) sales tax;
d) revenue.

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