Question

1.In 2001, the U.S. economy entered a recession and unemployment rose. Which one of the following types of unemployment was most likely caused by the recession?

a Cyclical unemployment

b Full unemployment

c Structural unemployment

2.

Mexico can produce vine-ripened tomatoes at a lower opportunity cost than firms in the United States. Through trade negotiations, the United States lifted quotas limiting the import of tomatoes from Mexico. Some firms in Florida, in the face of this new competition, had to close their farms and let go their workers. Many of the workers could not find new jobs right away. What type of unemployment describes the workers' situation?

a.Cyclical unemployment

b. Full unemployment

c.Structural unemployment

d.Target unemployment

3.

What will likely lower the level of cyclical unemployment?

a Workers move to the non-tradable sector.

b. The Fed sells Treasury securities.

c. The economy expands.

d. Okun’s law changes.

Answer 1

Answer to 1.

In 2001, the U.S. economy entered a recession and unemployment rose.

a. Cyclical unemployment was the most likely caused by the recession.

Answer to 2.

Mexico can produce vine-ripened tomatoes at a lower opportunity cost than firms in the United States. Through trade negotiations, the United States lifted quotas limiting the import of tomatoes from Mexico. Some firms in Florida, in the face of this new competition, had to close their farms and let go their workers. Many of the workers could not find new jobs right away.

c. The workers situation is described by structural unemployment.

Answer to 3

c. Teh economy expands will likely lower the level of cyclical unemployment.