AS Economics: Unemployment and the Labour Market

According to a supply-side economist, which one of the following would be likely to reduce the 'natural' rate of unemployment?
1. Increased government spending on unemployment benefits
2. The introduction of a statutory national minimum wage
3. A reduction in the collective bargaining power of trade unions
4. Legislationm to increase employment protection laws for employees
If the government wishes to achieve a fall in unemployment, which of the following policies should it adopt?
1. raise VAT
2. reduce government spending on capital projects
3. reduce the real value of income tax free allowances
4. seek to achieve a depreciation in the exchange rate
If the unemployment rate falls a Phillips curve diagram is likely to show an associated rise in:
1. aggregate supply
2. equilibrium national income
3. a possible acceleration in the rate of wage and price inflation
4. the balance of trade deficit in goods and services
An increase in aggregate demand is most likely to lead to an increase in employment when
1. unemployment is at its natural rate
2. aggregate supply is perfectly inelastic
3. the economy is currently operating at a point within its production possibility frontier
4. the natural rate of unemployment has risen
In a population of 50 million, 26m are employed and 2m unemployed. The labour force is
1. 50 million
2. 28 million
3. 26 million
4. 2 million
Which unemployment occurs if an aircraft engine works closes because of recession?
1. Frictional
2. Seasonal
3. Technological
4. Cyclical
The level of structural unemployment is most likely to be reduced by
1. Increasing labour mobility
2. Increasing government spending
3. Increasing investment grants to industry
4. Increasing interest rates
Unemployment is high but many vacancies are unfilled. Which is the most likely explanation?
1. An ageing population
2. Excessive wage claims by people in work
3. Occupational immobility of labour
4. The increased use of capital machinery
Supply-side measures to reduce unemployment include
1. Reducing the marginal rate of income tax
2. Increasing government spending on unemployment benefits
3. Increasing the money supply in the economy
4. Increasing government borrowing to fund capital investment projects by the public sector
The number employed in manufacturing has declined over the last two decades. Which best explains this trend?
1. There has been a fall in the demand for imports
2. Foreign firms have invested heavily in the UK
3. Firms have substituted capital for labour to control costs
4. The government has subsidised manufacturing industry too much
Which of the following would lead to more jobs in a region with high unemployment?
1. A reduction in tax-free allowances on new investment
2. A requirement that only local labour can be employed
3. A rationing system for building development in that region
4. A new system of locally determined wage rates
Which of the following is the best measure of the economic cost of higher unemployment?
1. The loss of potential exports for the economy
2. The output of goods and services the unemployed workers could have produced
3. The increase in social security benefits paid by the government
4. The loss of tax revenue
Students who leave school in the spring and look for work are one source of
1. Frictional Unemployment
2. Cyclical Unemployment
3. Structural Unemployment
4. Hidden Unemployment
The number of jobs in the textiles industry decreases, but the number of jobs in the travel industry increases. Initially, there will be
1. Full employment
2. A shortage of workers in both sectors
3. Structural unemployment
4. Cyclical unemployment in both sectors
An increase in interest rates when the exchange rate is rising is most likely to lead to an increase in
1. aggregate supply
2. aggregate demand
3. a balance of payments surplus
4. unemployment levels
A government wishing to reduce the level of unemployment through the use of fiscal policy would be most likely to
1. cut interest rates
2. increase the size of the budget deficit
3. boost the money supply by relaxing credit controls
4. encourage a depreciation of the exchange rate
The diagram below shows the aggregate demand for labour curve for a country together with the labour force and labour supply curves at a given real wage rate. The distance AB in the diagram represents
1. Cyclical Unemployment
2. The Natural Rate of Unemployment
3. Disequilibrium unemployment as a result of real wages being above their market clearing level
4. Frictional unemployment only
The table below summarises changes in the stucture of employment in the UK economy over the last twenty years

From the information contained in this table we can conclude that
1. By 2001, finance and business services are the largest employer in the UK economy
2. Manufacturing industry has been in recession throughout the period 1981-2001
3. Since 1981, nearly one quarter of the jobs in agriculture and fishing have been lost
4. There are an increasing number of job vacancies in the transport and communication industries
The chart below tracks unemployment rates for the Euro Zone countries, the UK, and Germany and France separately for each year since 1991.

From this information we can deduce that
1. UK unemployment has been below that of the Euro Zone average over the entire period
2. There were more people employed in the UK than in Germany in 2001
3. The UK's relative performance on unemployment compared to the Euro Zone has improved over the last ten years
4. There are more people employed in France in 2001 than there were in 1991
The chart below shows the annual rate of economic growth for the UK since 1986 together with the annual change in total employment (measured in thousands)

From this information we can deduce that
1. Total employment tends to fall in years when the economy is in recession
2. Most unemploment is structural and frictional
3. The economy needs to grow by at least 2% per year for total employment to rise
4. All industries have seen a rise in total employment since the end of the last recession
Suppose real output in the economy increased. We would expect
1. an increase in unemployment
2. a decrease in unemployment
3. a decrease in profit margins
4. an increase in the natural rate of unemployment
Which of the following are economic consequences of unemployment?
1. a rising price level, which reduces the real purchasing power of consumers
2. a rising real national output and income
3. an increase in consumer confidence
4. a decline in real national output and income
The natural rate of unemployment
1. is caused by cyclical business conditions
2. is the equilibrium rate of unemployment around which the actual unemployment rate fluctuates
3. comrpises frictional and cyclical unemployment
4. is not present when the economy has experienced several years of economic growth

AS Economics: Unemployment and the Labour Market

Economics Multiple-choice Quiz