Question

Which of the following statements correctly describe discouraged workers? (If none of the choices apply, leave all of the checkboxes blank.) Check all that apply.

a)They are counted as part of the labor force by the Bureau of Labor Statistics.

b)They have not looked for a job in 4 weeks (or longer), but they would like a job and are available for work.

c)They are employed workers who want to earn higher wages.

d)They are full-time workers who would like to work only part-time.

The following table contains U.S. employment information from February 2010.

Civilian Population	Employed	Unemployed	Discouraged
(Persons 16 years old and over)	(Persons)	(Persons)	(Persons)
236,998,000	138,698,000	14,860,000	1,204,000

The Bureau of Labor Statistics has several measures of joblessness in addition to the official unemployment rate. One alternative is the U-4 measure of labor underutilization, which is calculated as follows:

U-4U-4

=  =

100×Unemployed+DiscouragedLabor Force + Discouraged100×Unemployed+DiscouragedLabor Force + Discouraged

Fill in the following table by calculating the official unemployment rate and the U-4 measure of labor underutilization.

Official Unemployment Rate	U-4 Measure of Labor Underutilization
(Percent)	(Percent)

The official unemployment rate and the U-4 measure of labor underutilization are two different measures of joblessness in the economy.

If the Bureau of Labor Statistics were to include discouraged workers in the official unemployment rate, the reported unemployment rate would ----------------- .

2.

Suppose you win a small lottery and have the choice of two ways to be paid: You can accept the money in a lump sum or in a series of payments over time. If you pick the lump sum, you get $2,700 today. If you pick payments over time, you get three payments: $1,000 today, $1,000 1 year from today, and $1,000 2 years from today.

At an interest rate of 10% per year, the winner would be better off accepting the ...................... , since that choice has the greater present value.

At an interest rate of 12% per year, the winner would be better off accepting ................... , since it has the greater present value.

Years after you win the lottery, a friend in another country calls to ask your advice. By wild coincidence, she has just won another lottery with the same payout schemes. She must make a quick decision about whether to collect her money under the lump sum or the payments over time. What is the best advice to give your friend?

a)The lump sum is always better.

b)The payments over time are always better.

c)It will depend on the interest rate; advise her to get a calculator.

d)None of these answers is good advice.

Answer 1

Table 1

Official Unemployment rate	U-4 measure of labor underutilization
9.7%	10.4%

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2.