ECON 2120 CHAPTER 9 EXAM QUESTIONS WITH VERIFIED SOLUTIONS LATEST UPDATE 2026
What is the definition of the labor force? - Answers The sum of employed and unemployed workers
in the economy.
How is the unemployment rate calculated? - Answers The percentage of the labor force that is
unemployed.
What is the primary purpose of the Current Population Survey (household survey)? - Answers To
collect data on employment, unemployment, and labor force participation from a representative
sample of households.
How does the BLS define an 'employed' person? - Answers Someone who currently has a job or is
temporarily away from their job.
How does the BLS define an 'unemployed' person? - Answers Someone who is not currently at work
but is available for work and has actively looked for work during the previous month.
Who are 'discouraged workers'? - Answers People who are available for work but have not looked for
a job during the previous four weeks because they believe no jobs are available for them.
What is the labor-force participation rate? - Answers The percentage of the working-age population
that is in the labor force.
What is the employment-population ratio? - Answers The percentage of the working-age population
that is employed.
Why might the official unemployment rate (U-3) understate the true level of joblessness? - Answers It
excludes discouraged workers and does not account for underemployment (people working part-time
who want full-time work).
Why might the official unemployment rate (U-3) overstate the true level of joblessness? - Answers
Some individuals may falsely claim to be looking for work, or may claim not to be working to evade
taxes or hide criminal activity.
What is the difference between BLS series U-3 and U-6? - Answers U-3 is the official unemployment
rate, while U-6 is a broader measure that includes discouraged workers and underemployed workers.
What is the 'establishment survey' (payroll survey)? - Answers A survey that samples places of
employment to gather data on the number of people on company payrolls.
What is a major advantage of the establishment survey over the household survey? - Answers The
data are determined by real payroll records rather than self-reporting, making it less prone to certain
types of bias.
What are the disadvantages of the establishment survey? - Answers It excludes self-employed
people, often omits newly opened firms, provides no data on unemployment, and requires large
revisions due to sample fluctuations.
How does the BLS handle the discrepancy between household and establishment survey data? -
Answers They recognize that the two surveys measure different groups and have different error
sources, so they use both to get a more complete picture of the labor market.
What is the trend regarding the labor force participation rate of adult men since 1948? - Answers It
has declined gradually.
What is the trend regarding the labor force participation rate of adult women since 1948? - Answers
It increased significantly for many decades, though it has recently shown a decline.
How does the length of unemployment typically affect workers? - Answers Long periods of
unemployment can lead to skill decay, discouragement, and depression.
How did the 2007-2009 recession impact the average length of unemployment? - Answers The
average length of unemployment more than doubled, increasing from 4 months to 10 months.
How did the BLS classify people who were not working due to business closures during the Covid-19
pandemic? - Answers They were officially classified as 'employed but absent from work'.
Is the process of job creation and destruction in the U.S. economy considered abnormal? - Answers
No, it is a natural and normal process where millions of jobs are created and destroyed annually.
What is the age threshold for the 'working-age' population in labor statistics? - Answers 16 years old
and older.
What does the 'reference week' refer to in the household survey? - Answers The specific week for
which household members are asked about their employment status and job search activities.
Why are manufacturers of durable goods, like car factories, particularly sensitive to economic
changes? - Answers Because consumers often postpone large, expensive purchases during economic
downturns.
What is the definition of the labor force? - Answers The sum of employed and unemployed workers
in the economy.
How is the unemployment rate calculated? - Answers The percentage of the labor force that is
unemployed.
What is the primary purpose of the Current Population Survey (household survey)? - Answers To
collect data on employment, unemployment, and labor force participation from a representative
sample of households.
How does the BLS define an 'employed' person? - Answers Someone who currently has a job or is
temporarily away from their job.
How does the BLS define an 'unemployed' person? - Answers Someone who is not currently at work
but is available for work and has actively looked for work during the previous month.
Who are 'discouraged workers'? - Answers People who are available for work but have not looked for
a job during the previous four weeks because they believe no jobs are available for them.
What is the labor-force participation rate? - Answers The percentage of the working-age population
that is in the labor force.
What is the employment-population ratio? - Answers The percentage of the working-age population
that is employed.
Why might the official unemployment rate (U-3) understate the true level of joblessness? - Answers It
excludes discouraged workers and does not account for underemployment (people working part-time
who want full-time work).
Why might the official unemployment rate (U-3) overstate the true level of joblessness? - Answers
Some individuals may falsely claim to be looking for work, or may claim not to be working to evade
taxes or hide criminal activity.
What is the difference between BLS series U-3 and U-6? - Answers U-3 is the official unemployment
rate, while U-6 is a broader measure that includes discouraged workers and underemployed workers.
What is the 'establishment survey' (payroll survey)? - Answers A survey that samples places of
employment to gather data on the number of people on company payrolls.
What is a major advantage of the establishment survey over the household survey? - Answers The
data are determined by real payroll records rather than self-reporting, making it less prone to certain
types of bias.
What are the disadvantages of the establishment survey? - Answers It excludes self-employed
people, often omits newly opened firms, provides no data on unemployment, and requires large
revisions due to sample fluctuations.
How does the BLS handle the discrepancy between household and establishment survey data? -
Answers They recognize that the two surveys measure different groups and have different error
sources, so they use both to get a more complete picture of the labor market.
What is the trend regarding the labor force participation rate of adult men since 1948? - Answers It
has declined gradually.
What is the trend regarding the labor force participation rate of adult women since 1948? - Answers
It increased significantly for many decades, though it has recently shown a decline.
How does the length of unemployment typically affect workers? - Answers Long periods of
unemployment can lead to skill decay, discouragement, and depression.
How did the 2007-2009 recession impact the average length of unemployment? - Answers The
average length of unemployment more than doubled, increasing from 4 months to 10 months.
How did the BLS classify people who were not working due to business closures during the Covid-19
pandemic? - Answers They were officially classified as 'employed but absent from work'.
Is the process of job creation and destruction in the U.S. economy considered abnormal? - Answers
No, it is a natural and normal process where millions of jobs are created and destroyed annually.
What is the age threshold for the 'working-age' population in labor statistics? - Answers 16 years old
and older.
What does the 'reference week' refer to in the household survey? - Answers The specific week for
which household members are asked about their employment status and job search activities.
Why are manufacturers of durable goods, like car factories, particularly sensitive to economic
changes? - Answers Because consumers often postpone large, expensive purchases during economic
downturns.
