ECON 203 Test 2 Matthews Ole Miss Actual Exam
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Graded
Unemployment, Inflation & Business Cycles
Q1: Which of the following individuals would be counted in the official labor force?
A. A retired firefighter who does volunteer work
B. A discouraged worker who stopped looking last month
C. A part-time barista who is actively working [CORRECT]
D. A full-time student who has never held a job
Correct Answer: C
Rationale: The correct answer is C. For ECON 203 with Matthews, remember that the
labor force includes anyone who is employed or unemployed but actively seeking work.
Part-time workers count as employed, while discouraged workers and retirees are not in
the labor force.
Q2: In the town of Oxford, there are 80,000 adults in the working-age population. The
labor force consists of 50,000 people, and 3,500 are unemployed. What is the
unemployment rate?
A. 4.4%
B. 6.25%
C. 7.0% [CORRECT]
D. 8.75%
Correct Answer: C
Rationale: The correct answer is C. The unemployment rate is just the number of
unemployed divided by the labor force, not the whole working-age population. So 3,500
divided by 50,000 gives you 7%.
,Q3: Sarah graduated from Ole Miss in May and is spending the summer interviewing for
marketing positions. She has turned down a few offers that weren't the right fit. What
type of unemployment best describes Sarah's situation?
A. Cyclical
B. Structural
C. Frictional [CORRECT]
D. Seasonal
Correct Answer: C
Rationale: The correct answer is C. Sarah is between jobs and searching, which is
classic frictional unemployment. She's not structurally mismatched, and this isn't
caused by a downturn in the business cycle.
Q4: In the country of Magnolia, the working-age population is 200,000. Of these, 112,000
are employed full-time, 8,000 are unemployed and actively seeking work, 4,000 are
discouraged workers who have given up looking, and 6,000 are underemployed
part-time workers who want full-time jobs. What is the official unemployment rate in
Magnolia?
A. 4.0%
B. 6.25%
C. 6.67% [CORRECT]
D. 10.0%
Correct Answer: C
Rationale: The correct answer is C. The labor force is only the employed plus the
unemployed actively seeking work, so 120,000 total. Divide the 8,000 unemployed by
that 120,000 labor force and you get 6.67%. Don't count discouraged workers or
underemployed folks in the official rate.
Q5: Refer to the Magnolia economy described in the previous question. What is
Magnolia's labor force participation rate?
A. 56%
B. 60% [CORRECT]
C. 62%
D. 64%
Correct Answer: B
, Rationale: The correct answer is B. Labor force participation is the labor force divided by
the working-age population. With 120,000 in the labor force and 200,000 working-age
adults, that's 60%.
Q6: Again referring to Magnolia, if all 4,000 discouraged workers began actively
searching for jobs, what would happen to the measured unemployment rate?
A. It would decrease because the labor force grew
B. It would remain unchanged at 6.67%
C. It would increase [CORRECT]
D. It would fall to 4.0%
Correct Answer: C
Rationale: The correct answer is C. If those discouraged workers start looking again,
they re-enter the labor force as unemployed. That pushes the unemployment rate up
because you're adding more unemployed people into the calculation.
Q7: During a deep recession, many former factory workers stop looking for jobs after
months of unsuccessful searching. How does this affect the official unemployment
rate?
A. It causes the unemployment rate to increase
B. It causes the unemployment rate to decrease [CORRECT]
C. It causes the labor force participation rate to increase
D. It has no effect on either rate
Correct Answer: B
Rationale: The correct answer is B. When workers stop looking, they drop out of the
labor force entirely. Since they're no longer counted as unemployed, the measured
unemployment rate actually falls, even though the labor market isn't improving.
Q8: The labor force participation rate is calculated as:
A. The number of employed workers divided by the total population
B. The labor force divided by the working-age population, times 100 [CORRECT]
C. The number of unemployed workers divided by the labor force, times 100
D. The working-age population divided by the total population, times 100
Correct Answer: B
A+ Guaranteed | Macroeconomics | Complete
Questions & Rationales | Pass Guaranteed - A+
Graded
Unemployment, Inflation & Business Cycles
Q1: Which of the following individuals would be counted in the official labor force?
A. A retired firefighter who does volunteer work
B. A discouraged worker who stopped looking last month
C. A part-time barista who is actively working [CORRECT]
D. A full-time student who has never held a job
Correct Answer: C
Rationale: The correct answer is C. For ECON 203 with Matthews, remember that the
labor force includes anyone who is employed or unemployed but actively seeking work.
Part-time workers count as employed, while discouraged workers and retirees are not in
the labor force.
Q2: In the town of Oxford, there are 80,000 adults in the working-age population. The
labor force consists of 50,000 people, and 3,500 are unemployed. What is the
unemployment rate?
A. 4.4%
B. 6.25%
C. 7.0% [CORRECT]
D. 8.75%
Correct Answer: C
Rationale: The correct answer is C. The unemployment rate is just the number of
unemployed divided by the labor force, not the whole working-age population. So 3,500
divided by 50,000 gives you 7%.
,Q3: Sarah graduated from Ole Miss in May and is spending the summer interviewing for
marketing positions. She has turned down a few offers that weren't the right fit. What
type of unemployment best describes Sarah's situation?
A. Cyclical
B. Structural
C. Frictional [CORRECT]
D. Seasonal
Correct Answer: C
Rationale: The correct answer is C. Sarah is between jobs and searching, which is
classic frictional unemployment. She's not structurally mismatched, and this isn't
caused by a downturn in the business cycle.
Q4: In the country of Magnolia, the working-age population is 200,000. Of these, 112,000
are employed full-time, 8,000 are unemployed and actively seeking work, 4,000 are
discouraged workers who have given up looking, and 6,000 are underemployed
part-time workers who want full-time jobs. What is the official unemployment rate in
Magnolia?
A. 4.0%
B. 6.25%
C. 6.67% [CORRECT]
D. 10.0%
Correct Answer: C
Rationale: The correct answer is C. The labor force is only the employed plus the
unemployed actively seeking work, so 120,000 total. Divide the 8,000 unemployed by
that 120,000 labor force and you get 6.67%. Don't count discouraged workers or
underemployed folks in the official rate.
Q5: Refer to the Magnolia economy described in the previous question. What is
Magnolia's labor force participation rate?
A. 56%
B. 60% [CORRECT]
C. 62%
D. 64%
Correct Answer: B
, Rationale: The correct answer is B. Labor force participation is the labor force divided by
the working-age population. With 120,000 in the labor force and 200,000 working-age
adults, that's 60%.
Q6: Again referring to Magnolia, if all 4,000 discouraged workers began actively
searching for jobs, what would happen to the measured unemployment rate?
A. It would decrease because the labor force grew
B. It would remain unchanged at 6.67%
C. It would increase [CORRECT]
D. It would fall to 4.0%
Correct Answer: C
Rationale: The correct answer is C. If those discouraged workers start looking again,
they re-enter the labor force as unemployed. That pushes the unemployment rate up
because you're adding more unemployed people into the calculation.
Q7: During a deep recession, many former factory workers stop looking for jobs after
months of unsuccessful searching. How does this affect the official unemployment
rate?
A. It causes the unemployment rate to increase
B. It causes the unemployment rate to decrease [CORRECT]
C. It causes the labor force participation rate to increase
D. It has no effect on either rate
Correct Answer: B
Rationale: The correct answer is B. When workers stop looking, they drop out of the
labor force entirely. Since they're no longer counted as unemployed, the measured
unemployment rate actually falls, even though the labor market isn't improving.
Q8: The labor force participation rate is calculated as:
A. The number of employed workers divided by the total population
B. The labor force divided by the working-age population, times 100 [CORRECT]
C. The number of unemployed workers divided by the labor force, times 100
D. The working-age population divided by the total population, times 100
Correct Answer: B
