Questions

What are frictional, structural, and cyclical unemployment?

What is the function of government employment agencies?How do they promote employment? How do they promote unemployment?

Give three explanations why the real wage may stay above the level that equilibrates labor supply and labor demand.

Suppose that a country experiences a reduction in productivity--that is, an adverse shock to the production function. (This example should sound familiar!)
a. What happens to the labor demand curve?
b. How would this change in productivity affect the labor market--that is, employment, unemployment, and real wages--if the labor market was always in equilibrium?
c. How would this change in productivity affect the labor market if unions prevented real wages from falling?

Define unemployment insurance. How does it work in the United States? How does it work in Mexico? What do the two studies discussed in class today suggest about the effects of employment insurance on incentives?

Define wait unemployment. How is this affected by labor unions and minimum wages? How is the labor market affected if the minimum wage is below the market-clearing wage for unskilled workers?

Define efficiency wages. What are the five reasons that employers may have to pay them. If they exist, how would this promote unemployment greater than than the natural rate? What are the two objections to their existence, as discussed in class?