Module M03 Quiz: Unemployment and the Labour Market

25 questions · Introductory · Mix of multiple choice, calculation, and short answer

How to use

Attempt each question before clicking Show Answer. For calculation questions, write out your working before checking.

Question 1

Lesson L01 · Unemployment

What are the three conditions the ABS uses to classify someone as unemployed?

Type: Multiple Choice

A) Not employed, looking for work, available to start
B) Not employed, wants a job, has a degree
C) Employed part-time, wants full-time, available
D) Not employed, retired, available

Show Answer

Answer: A) Not employed, looking for work, available to start

To be unemployed, a person must not be employed, be actively looking for work, and be available to start within a week.

Question 2

Lesson L01 · Intro

If the labour force is 14.8 million and unemployed is 607,000, what is the unemployment rate?

Type: Calculation

Show Answer

Answer: Unemployment rate = (Unemployed / Labour Force) * 100 = (607,000 / 14,800,000) * 100 ≈ 4.1%.

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Question 3

Lesson L01 · Intro

What is the underemployment rate if 950,000 part-time workers want more hours and the labour force is 14.8 million?

Type: Calculation

Show Answer

Answer: Underemployment rate = (Underemployed / Labour Force) * 100 = (950,000 / 14,800,000) * 100 ≈ 6.4%.

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Question 4

Lesson L01 · Intro

Why might a fall in the unemployment rate not indicate an improving labour market?

Type: Short Answer

Show Answer

Answer: If discouraged workers stop looking for jobs, they exit the labour force, reducing both unemployment and participation rates.

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Question 5

Lesson L01 · Intro

What is the labour underutilisation rate if unemployment is 4.1% and underemployment is 6.6%?

Type: Calculation

Show Answer

Answer: Labour underutilisation rate = Unemployment + Underemployment = 4.1% + 6.6% = 10.7%.

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Question 6

Lesson L02 · Unemployment

What type of unemployment arises from the time it takes workers to find suitable jobs?

Type: Multiple Choice

A) Frictional
B) Structural
C) Cyclical
D) Seasonal

Show Answer

Answer: A) Frictional

Frictional unemployment is short-term and arises from the normal job-search process.

Question 7

Lesson L02 · Intro

If frictional unemployment is 350,000 and structural is 200,000 in a labour force of 14.5 million, what is the NAIRU?

Type: Calculation

Show Answer

Answer: NAIRU = (Frictional + Structural) / Labour Force * 100 = (550,000 / 14,500,000) * 100 ≈ 3.8%.

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Question 8

Lesson L02 · Unemployment

What type of unemployment dominated during the COVID-19 pandemic in 2020?

Type: Multiple Choice

A) Frictional
B) Structural
C) Cyclical
D) Seasonal

Show Answer

Answer: C) Cyclical

The sudden collapse in demand due to lockdowns caused cyclical (demand-deficient) unemployment.

Question 9

Lesson L02 · Intro

Why is zero unemployment neither achievable nor desirable?

Type: Short Answer

Show Answer

Answer: Frictional and structural unemployment will always exist due to job-search processes and skill mismatches; pushing unemployment too low can cause inflation.

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Question 10

Lesson L02 · Unemployment

What is hysteresis in the context of unemployment?

Type: Multiple Choice

A) A type of frictional unemployment
B) The tendency for high unemployment to persist
C) A measure of underemployment
D) A government policy tool

Show Answer

Answer: B) The tendency for high unemployment to persist

Hysteresis refers to the persistence of high unemployment even after recovery, as long-term unemployed workers lose skills and connections.

Question 11

Lesson L03 · Labour Market

What determines the equilibrium wage in a competitive labour market?

Type: Multiple Choice

A) The intersection of labour supply and demand
B) Government policy alone
C) The highest wage workers demand
D) The lowest wage firms offer

Show Answer

Answer: A) The intersection of labour supply and demand

The equilibrium wage is where labour supply equals labour demand.

Question 12

Lesson L03 · Intro

If labour demand is Q_D = 500,000 - 10,000W and supply is Q_S = -100,000 + 20,000W, what is the equilibrium wage?

Type: Calculation

Show Answer

Answer: Set Q_D = Q_S: 500,000 - 10,000W = -100,000 + 20,000W → 600,000 = 30,000W → W = $20/hour.

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Question 13

Lesson L03 · Labour Market

What type of unemployment results from a minimum wage above the equilibrium wage?

Type: Multiple Choice

A) Frictional
B) Structural
C) Cyclical
D) None of the above

Show Answer

Answer: D) None of the above

A binding minimum wage creates a surplus of labour (unemployment) but is not classified as frictional, structural, or cyclical.

Question 14

Lesson L03 · Intro

Why might a minimum wage not always increase unemployment as predicted by basic models?

Type: Short Answer

Show Answer

Answer: In monopsony labour markets, a minimum wage can counteract employer power and increase employment up to a point.

labour-market

Question 15

Lesson L03 · Labour Market

What shifts the labour demand curve to the right?

Type: Multiple Choice

A) Higher wages
B) Lower productivity
C) Higher product prices
D) Fewer workers

Show Answer

Answer: C) Higher product prices

Higher product prices increase the value of workers' output, raising demand for labour at any given wage.

Question 16

Lesson L04 · Unemployment

What is Okun's Law?

Type: Multiple Choice

A) The relationship between unemployment and inflation
B) The relationship between unemployment and GDP
C) The relationship between wages and productivity
D) The relationship between interest rates and investment

Show Answer

Answer: B) The relationship between unemployment and GDP

Okun's Law states that for every 1% rise in unemployment above NAIRU, GDP falls by ~2% below potential.

Question 17

Lesson L04 · Intro

If NAIRU is 4.5% and actual unemployment is 7.5%, what is the output gap (Okun coefficient = 2)?

Type: Calculation

Show Answer

Answer: Output gap = -2 × (7.5% - 4.5%) = -6.0%.

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Question 18

Lesson L04 · Unemployment

What is a key social cost of high unemployment?

Type: Multiple Choice

A) Higher GDP growth
B) Increased mental health issues
C) Lower inflation
D) Higher wages

Show Answer

Answer: B) Increased mental health issues

High unemployment is linked to increased depression, anxiety, and other mental health problems.

Question 19

Lesson L04 · Intro

Explain why unemployment benefits are not 'free' for the economy.

Type: Short Answer

Show Answer

Answer: Unemployment benefits require taxation or borrowing, and unemployment itself reduces output, creating real economic costs beyond transfers.

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Question 20

Lesson L04 · Unemployment

What is hysteresis in the context of unemployment?

Type: Multiple Choice

A) A temporary fluctuation
B) A permanent increase in NAIRU
C) A type of frictional unemployment
D) A government policy

Show Answer

Answer: B) A permanent increase in NAIRU

Hysteresis refers to prolonged high unemployment raising NAIRU permanently, as workers lose skills and connections.

Question 21

Lesson L05 · Business Cycle

What is a recession?

Type: Multiple Choice

A) Two consecutive quarters of negative GDP growth
B) A period of high inflation
C) A stock market crash
D) A rise in unemployment

Show Answer

Answer: A) Two consecutive quarters of negative GDP growth

A recession is conventionally defined as two consecutive quarters of negative real GDP growth.

Question 22

Lesson L05 · Business Cycle

What type of shock was the 1974 OPEC oil price hike?

Type: Multiple Choice

A) Positive demand shock
B) Negative demand shock
C) Positive supply shock
D) Negative supply shock

Show Answer

Answer: D) Negative supply shock

The oil price hike was a negative supply shock, raising production costs and reducing output.

Question 23

Lesson L05 · Business Cycle

What caused Australia's 2020 recession?

Type: Multiple Choice

A) Tight monetary policy
B) COVID-19 lockdowns
C) A housing bubble
D) Trade wars

Show Answer

Answer: B) COVID-19 lockdowns

The 2020 recession was caused by COVID-19 lockdowns, which simultaneously crushed demand and disrupted supply.

Question 24

Lesson L05 · Intro

Why are recessions not always caused by policy mistakes?

Type: Short Answer

Show Answer

Answer: Many recessions stem from external shocks (e.g., pandemics, oil price spikes) beyond government control, though policy can amplify or dampen effects.

business-cycle

Question 25

Lesson L05 · Business Cycle

What is stagflation?

Type: Multiple Choice

A) High inflation and high unemployment
B) Low inflation and low unemployment
C) High GDP growth and low inflation
D) Low GDP growth and low unemployment

Show Answer

Answer: A) High inflation and high unemployment

Stagflation is the combination of stagnant output (high unemployment) and rising prices (high inflation), as seen in the 1970s oil shocks.