Suppose an Economist Breaks the Unemployment Rate into the Following

question 130

Multiple Choice

Suppose an economist breaks the unemployment rate into the following components: frictional (2%) , structural (1%) , and cyclical (4%) . Based on these estimates, the natural rate of unemployment is

• A) 0%.
• B) 3%.
• C) 5%.
• D) 7%.

Identify the characteristics of a good economic theory.

Understand the concept of rational self-interest in economic decision-making.

Differentiate between normative and positive economic statements.

Recognize the role of economists in storytelling to clarify economic theories and models.

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Definitions:

Moral Hazard

The risk that a party insulated from risk may behave differently than if they were fully exposed to the risk.

Adverse Selection

A situation where asymmetric information results in high-risk individuals being more likely to participate in an agreement or purchase, negatively affecting the seller or insurer.

Salaried Salesman

A salesperson who is compensated with a fixed salary rather than or in addition to commissions.

Employee Turnover

The rate at which employees leave a workforce and are replaced by new hires within a given period.