Economics MCQ - Economics Section 2

21 Assuming that the working-age population is constant, if the labor force participation ratio declines while the number of people employed remains unchanged, the unemployment rate will most likely:

For a given working-age population, a decline in the labor force participation rate, which is often the result of an increase in discouraged workers, reduces the labor force. If the number of people employed remain the same while the labor force is smaller, the number of workers defined to be unemployed must be smaller and the unemployment rate lower.

22 The following information applies to an economy:

Total population	2,200
Working age population	1,950
Labor force	1,500
underemployed	240
unemployed	190
Discouraged workers	160
Frictionally unemployed	50
Voluntarily unemployed	80

The unemployment rate in the economy is closest to:

Unemployment rate = (Unemployed / Labor force) * 100 = (190 / 1500) * 100 = 12.6%.

23 The unemployment rate is best described as the ratio of unemployed to:

The unemployment rate is the ratio of unemployed to labor force

24 Two analysts make the following statements:
Analyst 1: Comparisons of unemployment among countries are impossible.
Analyst 2: Comparisons of unemployment among countries must take into account different unemployment measurement methods. Which analyst’s statement is most likely true?

Different countries use different statistical scope and ratio definitions and these differences have to be reconciled before meaningful conclusions can be made from cross country comparisons.

25 Which of the following is the most appropriate reason why unemployment lags business cycle?

To reduce costs related to hiring and firing, businesses are reluctant to dismiss and hire workers.