These are original Marlbridge practice questions, not past exam questions. All questions use Valdoria, a fictional country whose currency is the valda (VD); all people and figures are fictional. The rubrics are a suggested Marlbridge rubric to help you check your work; they are not an official scoring guideline. Assumptions: the adult population is constant within each question unless stated; numbers of people are in millions; round rates to 2 decimal places.
Question 1 (multiple choice · foundation)
Which of the following Valdorians is counted as unemployed?
- (A) A 68-year-old retired bus driver who is not looking for work
- (B) A university student who works 6 hours a week in a café
- (C) A welder who was laid off last month, has applied for jobs every week since and could start tomorrow
- (D) A shop assistant who wants a job but stopped looking six months ago because she believes there are no vacancies
Answer and explanation
Answer: (C). He has no job, is available and is actively looking, which are the three conditions for being unemployed.
- (A) is not looking for work, so he is outside the labor force.
- (B) has paid work. Any paid work, even a few hours a week, counts as employed.
- (D) is a discouraged worker. She wants a job but is not looking, so she is outside the labor force, not unemployed.
Question 2 (multiple choice · core)
A Valdorian region has an adult population of 32.0 million. 18.4 million people are employed and 1.6 million are unemployed. What is the unemployment rate?
- (A) 5.00%
- (B) 8.00%
- (C) 8.70%
- (D) 62.50%
Answer and explanation
Answer: (B). Labor force = 18.4 + 1.6 = 20.0 million. Unemployment rate = 1.6 ÷ 20.0 × 100 = 8.00%.
- (A) divides by the adult population (1.6 ÷ 32.0). The unemployment rate uses the labor force.
- (C) divides by the number employed (1.6 ÷ 18.4). The unemployed must be included in the denominator.
- (D) is the labor force participation rate (20.0 ÷ 32.0 × 100), not the unemployment rate.
Question 3 (multiple choice · core)
During a long slump, 200,000 unemployed Valdorians give up looking for work because they believe no jobs are available. Nothing else changes. What happens to the unemployment rate and the labor force participation rate?
- (A) The unemployment rate rises; the participation rate is unchanged.
- (B) The unemployment rate falls; the participation rate falls.
- (C) The unemployment rate falls; the participation rate is unchanged.
- (D) The unemployment rate is unchanged; the participation rate falls.
Answer and explanation
Answer: (B). The 200,000 become discouraged workers and leave the labor force. The number unemployed falls by more, in percentage terms, than the labor force, so the unemployment rate falls. The labor force shrinks while the adult population is unchanged, so the participation rate falls.
- (A) assumes discouraged workers are still counted as unemployed. They are not.
- (C) forgets that leaving the labor force reduces participation.
- (D) forgets that the number counted as unemployed falls.
Question 4 (multiple choice · core)
Valdoria’s car factories install robots that do all their welding. The laid-off welders find that the jobs on offer need programming skills they do not have, and they stay jobless for over a year even while the economy grows. This is an example of
- (A) frictional unemployment
- (B) structural unemployment
- (C) cyclical unemployment
- (D) workers who are outside the labor force
Answer and explanation
Answer: (B). Technology has changed the skills firms need, so there is a lasting mismatch between the welders’ skills and the jobs available.
- (A) Frictional unemployment is the normal search time for a suitable job. Here the problem is that suitable jobs for their skills no longer exist.
- (C) Cyclical unemployment comes from a downturn. The economy is growing, so the cause is not the business cycle.
- (D) The welders are still looking for work, so they are in the labor force as unemployed.
Question 5 (calculation · core)
Valdoria’s adult population is 80.0 million. The labor force participation rate is 62.5% and the unemployment rate is 6.0%.
(a) Calculate the labor force, the number unemployed, the number employed and the number not in the labor force. (b) Next year, 1.0 million people who were outside the labor force start looking for work, and 0.5 million of them find jobs. Calculate the new unemployment rate and participation rate.
Worked solution
(a) Labor force = 62.5% × 80.0 = 50.0 million. Unemployed = 6.0% × 50.0 = 3.0 million. Employed = 50.0 − 3.0 = 47.0 million. Not in the labor force = 80.0 − 50.0 = 30.0 million.
(b) Labor force = 50.0 + 1.0 = 51.0 million. Employed = 47.0 + 0.5 = 47.5 million. Unemployed = 3.0 + 0.5 = 3.5 million.
Unemployment rate = 3.5 ÷ 51.0 × 100 = 6.86%. Participation rate = 51.0 ÷ 80.0 × 100 = 63.75%.
Both rates rose. More people entered the labor force than found jobs, so the unemployment rate went up even though employment increased.
Suggested mark points (4): 1 for the labor force of 50.0 million; 1 for unemployed 3.0 and employed 47.0 million; 1 for the new unemployment rate of 6.86%; 1 for the new participation rate of 63.75%. Accept answers carried forward from an error in (a).
Question 6 (constructed response · core)
Valdoria’s statistics office estimates that frictional unemployment is 2.1% and structural unemployment is 3.4% of the labor force. In a recession the actual unemployment rate is 7.5%.
(a) Calculate the natural rate of unemployment. (b) Calculate the cyclical unemployment rate. (c) As the economy recovers, the actual rate falls to the natural rate. State the cyclical rate at that point and whether the economy is at full employment. (d) A new national job-matching website cuts the average time it takes workers to find a suitable job. Explain the effect on the natural rate of unemployment. (e) Over the next decade, a much larger share of Valdoria’s labor force is aged under 25. Explain how this could change the natural rate.
Worked solution and suggested Marlbridge rubric
(a) Natural rate = 2.1% + 3.4% = 5.5%.
(b) Cyclical rate = 7.5% − 5.5% = 2.0%.
(c) Cyclical rate = 0%. The economy is at full employment, even though 5.5% of the labor force is still unemployed.
(d) Workers and firms are matched faster, so people spend less time between jobs. Frictional unemployment falls, so the natural rate falls.
(e) Young workers tend to try several jobs, enter the labor force for the first time and change jobs more often, so they spend more time searching. Frictional unemployment rises, so the natural rate rises. This is a change in labor force characteristics.
| Point | What earns it |
|---|---|
| 1 | Natural rate of 5.5% |
| 1 | Cyclical rate of 2.0% |
| 1 | Cyclical rate of 0% and full employment with positive unemployment |
| 1 | Faster matching reduces frictional unemployment, so the natural rate falls |
| 1 | More young workers means more job searching, so frictional unemployment and the natural rate rise |
Accept a carried-forward cyclical rate in (b). In (e), also accept a valid argument that young workers’ skills mismatch raises structural unemployment.
Question 7 (constructed response · stretch)
Valdoria’s labor market data for one month:
| Group | Number (millions) |
|---|---|
| Adult population | 75.0 |
| Employed (including 3.0 million part-time workers who want full-time work) | 45.0 |
| Unemployed | 3.0 |
| Discouraged workers (included in “not in the labor force”) | 1.0 |
(a) Calculate the official unemployment rate and the labor force participation rate. (b) Calculate what the unemployment rate would be if discouraged workers were counted as unemployed. (c) A minister says, “With unemployment at 6.25%, almost everyone who wants a full-time job has one.” Using the data, explain two reasons this claim overstates the health of the labor market.
Model answer and suggested Marlbridge rubric
(a) Labor force = 45.0 + 3.0 = 48.0 million. Unemployment rate = 3.0 ÷ 48.0 × 100 = 6.25%. Participation rate = 48.0 ÷ 75.0 × 100 = 64.00%.
(b) Unemployed = 3.0 + 1.0 = 4.0 million; labor force = 48.0 + 1.0 = 49.0 million. Rate = 4.0 ÷ 49.0 × 100 = 8.16%.
(c)
- Discouraged workers. 1.0 million people want jobs but have stopped looking. They are outside the labor force, so the official rate leaves them out. Counting them raises the rate to 8.16%.
- Involuntary part-time workers. 3.0 million people counted as employed want full-time work but cannot get it. The official rate treats them as fully employed, so it misses their lost hours and income.
Both mean the official rate understates joblessness. The claim that almost everyone who wants a full-time job has one ignores at least 1.0 + 3.0 = 4.0 million people in addition to the 3.0 million counted as unemployed.
| Point | What earns it |
|---|---|
| 1 | Unemployment rate of 6.25% and participation rate of 64.00% |
| 1 | 8.16%, adding the discouraged workers to both the unemployed and the labor force |
| 1 | Explains that discouraged workers are excluded because they are not looking |
| 1 | Explains that part-time workers who want full-time work count as employed |
In (b), 4.0 ÷ 48.0 × 100 = 8.33% does not earn the point: the discouraged workers must also join the labor force. In (c), naming the two groups without explaining how they are counted earns at most one point.
How did you do?
- Q1 wrong: re-read “Sorting the adult population into three groups” in the study guide.
- Q2, Q5 or Q7(a)–(b) wrong: check your denominators; see Worked example 1 and Worked example 2.
- Q3 or Q5(b) wrong: revisit “How changes in the labor market move the rates”.
- Q4 wrong: revisit “Three types of unemployment”.
- Q6 wrong: revisit “The natural rate of unemployment” and Worked example 3.
- Q7(c) wrong: revisit “Limitations of the unemployment rate”.
Then tick off the topic checklist.