unemployment quiz - AP Macro

Q: What is unemployment?

A: Workers who are actively looking for a job but are not currently working.

Q: How do you calculate the unemployment rate?

A: \text{Unemployment Rate} = \frac{\text{# unemployed}}{\text{# in labor force}} \times 100

Q: Who is included in the labor force?

A: People 16+ who are employed or actively seeking work in the last 4 weeks.

Q: Who is NOT in the labor force?

A: Institutionalized (prison, hospitals), military, full-time students, or retired people.

Q: What is the Labor Force Participation Rate (LFPR)?

A: The percentage of the working-age population that is employed or actively seeking employment.

Q: How is LFPR calculated?

A: \text{LFPR} = \frac{\text{Labor Force}}{\text{Adult Population}} \times 100

Q: How does LFPR differ from the unemployment rate?

A: LFPR measures % of population in the labor force, unemployment rate measures % of the labor force without a job.

Q: Give examples of who is employed, unemployed, or not in the labor force.

A:

• Retired grandparent → Not in labor force
  
  

• 16-year-old student applying for work → Unemployed
  
  

College student working part-time → Employed

Q: What is frictional unemployment?

A: Temporary unemployment between jobs; includes seasonal unemployment.

Q: Give examples of frictional unemployment.

A: High school or college graduates looking for jobs; someone switching jobs or fired.

Q: What is structural unemployment?

A: When workers’ skills become obsolete; they need new skills to find work.

Q: Give examples of structural unemployment.

A: VCR repairman, milkman; technological unemployment (automation replaces jobs).

Q: What is cyclical unemployment?

A: Unemployment caused by a recession when demand for goods and labor falls.

Q: Give examples of cyclical unemployment.

A: Steelworkers laid off during recessions, restaurant layoffs after poor sales.

Q: What is the Natural Rate of Unemployment (NRU)?

A: The sum of frictional and structural unemployment when the economy is healthy.

Q: Why is zero unemployment not the goal?

A: Some frictional and structural unemployment is always present; economy is healthy at 4–6% unemployment.

Q: What is full employment output (Y)?

A: The real GDP created when there is no cyclical unemployment.

Q: Why can the unemployment rate misrepresent reality?

A:

• Discouraged workers: Stop looking, lowering unemployment rate
  
  

• Underemployed: Want more hours but counted as employed
  
  

• Race/Age inequalities: Overall rate hides disparities