CHAPTER 6
1. a. False. b. False. c. False. d. False. e. True. f. False.
g. Uncertain. h. True.
i. False.
2. a. (Monthly hires+monthly separations)/monthly employment =6/93.8=6.4%
b. 1.6/6.5=25%
c. 2.4/6.5=37%. Duration is 1/.37 or 2.7 months. d. 4.9/57.3=9%.
e. new workers: .35/4.9=7%; retirees: .2/4.9=4%.
3. a and b. Answers will depend on when the page is accessed.
c. The decline in unemployment does not equal the increase in employment, because the labor force is not constant. It has increased over the period.
4. a. 66%; 66%*66%*66%= 29%; (66%)6 = 8%
b. (66%)6 = 8%
c. (for 1998): 875/6210= .14
5. a. Answers will vary.
b and c. Most likely, the job you will have ten years later will pay a lot more than your reservation wage at the time (relative to your typical first job).
d. The later job is more likely to require training and will probably be a much harder job to monitor. So, as efficiency wage theory suggests, your employer will be willing to pay a lot more than your reservation wage for the later job, to ensure low turnover and low shirking.
6. a. The computer network administrator has more bargaining power. She is much harder to replace.
b. The rate of unemployment is a key statistic. For example, when there are many unemployed workers it becomes easier for firms to find replacements. This reduces the bargaining power of workers.
7. a. W/P=1/(1+?)=1/1.05=.95
b. Price setting: u=1-W/P=5%
c. W/P=1/1.1=.91; u=1-.91=9%. The increase in the markup lowers the real wage. From the wage-setting equation, the unemployment rate must rise for the real wage to fall. So the natural rate increases.