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The full-time unemployment rate cannot be determined with great
precision. One thing is certain: it cannot be zero or even close
to zero. A zero unemployment rate would mean that no one ever entered
or re-entered the labor force, that no one ever quit a job or was
laid off, and that for new entrants or re-entrants, the process
of searching for a job consumed no time. Moreover, full-time employment
cannot be defined as an equality between the number of unemployed
persons and the number of unfilled jobs. By this definition, almost
any unemployment rate could be consistent with the full-time employment
rate.
The customary definition of the full-time U.S. unemployment rate
is the lowest rate of unemployment that can be attained without
resulting in an accelerated rate of inflation, given the existing
economic conditions. However, no one can be sure exactly what the
unemployment rate is, based on this definition, since it is not
possible to predict exactly how great a change in the rate of inflation
will be associated with any given change in the unemployment rate.
In the early 1960s, President Kennedy's Council of Economic Advisors
(CEA) determined that 4 percent was the best estimate of the full-time
U.S. unemployment rate. That rate was based on data collected during
the period from mid-1955 to mid-1957, when the U.S. unemployment
rate fluctuated around an average of 4.1 percent and the consumer
price index advanced at an average rate of 2.5 percent per year.
Although a 4-percent U.S. unemployment rate may have been consistent
with an acceptably low rate of inflation in the mid-1950s, by the
1960s this proposition had become increasingly doubtful. Our experience
since then has been such that those who accept the customary definition
of the full-time U.S. unemployment rate now consider 4.5 percent
to be the optimal rate under the existing circumstances.
The principal reason for this upward adjustment in the full-time
U.S. unemployment rate is the changed composition of the labor force.
As the labor force becomes increasingly composed of elderly people
and women, the number of workers has increased. Similarly, the number
of workers who are now eligible to collect benefits has increased.
To the extent that these changes have increased voluntary and involuntary
layoff rates and the average length of time unemployed persons spend
looking for work, the full-time unemployment rate has risen.
1) The passage states that
the full-time unemployment rate represents:
(A) A rate consistent with the greatest number of job opportunities
for the greatest number of workers.
(B) The greatest degree of stability in the placement of the labor
force that is practically attainable.
(C) A figure below which unemployment is unlikely to fall without
having negative economic effects.
(D) an ideal matching of unemployed workers with the number and
type of unfilled jobs available.
(E) A value that cannot be determined.
2) According to the passage,
all of the following factors must be considered in estimating the
full-time unemployment rate EXCEPT:
(A) The percentage of women in the work force.
(B) The ratio of the number of unemployed workers to the number
of vacant positions.
(C) The strength of inflationary tendencies in the economic system.
(D) The number of young people in the job market.
(E) The availability of financial help for those who are out of
work.
3) The author is most likely
a(n):
(A) politician
(B) economist
(C) statistician
(D) journalist
(E) feminist
4) The author believes that
a zero unemployment rate is:
(A) imminent
(B) plausible
(C) convincing
(D) unlikely
(E) impossible
5) The purpose of the third
paragraph is to:
(B) make a prediction about the unemployment rate.
(C) provide evidence for a statement made in paragraph 2.
(D) contribute to the overall message of the passage.
(E) define a trend in unemployment history.
6) The passage implies that
the extension of unemployment insurance to new groups of workers
and the lengthening of the period for benefit payments may have
encouraged:
I. Layoffs of workers by employers.
II. Abandonment of unsatisfactory jobs by employees.
III. Longer periods of job hunting by unemployed workers.
(A) I only
(B) I and II only
(C) I and III only
(D) II and III only
(E) I, II, and III
7) The passage provides information
to answer which of the following questions?
(A) Why is a zero unemployment rate unlikely ever to be attained?
(B) What is the likely future trend of the full-employment unemployment
rate?
(C) Why has the percentage of younger workers in the job market
increased?
(D) What rate of inflation is generally considered to be the highest
acceptable rate?
(E)To what extent do workers tend to quit their jobs as a result
of increased unemployment benefits?
8) The author’s attitude
toward the existence of a zero unemployment rate is one of
(A) perplexity
(B) uncertainty
(C) suspicion
(D) indignation
(E) disdain
9) The purpose of the second
paragraph is to:
(A) explain the complex process in which a term was defined.
(B) express doubt about the validity of a term.
(C) provide statistical evidence for the resolution of a conflict.
(D) show the role of government in creating unemployment.
(E) defend a diverse group of definitions for one term.
Answer Explanations:
1) The passage states that
the full-time unemployment rate represents:
(A) A rate consistent with the greatest number of job opportunities
for the greatest number of workers.
(B) The greatest degree of stability in the placement of the labor
force that is practically attainable.
(C) A figure below which unemployment is unlikely to fall without
having negative economic effects.
(D) an ideal matching of unemployed workers with the number and
type of unfilled jobs available.
(E) A value that cannot be determined.
Type: Detail of the Passage
(C). This definition can be found in the first sentence of paragraph
two: “The customary definition of the full-time U.S. unemployment
rate is the lowest rate of unemployment that can be attained without
resulting in an accelerated rate of inflation, given the existing
economic conditions.”
2) According to the passage,
all of the following factors must be considered in estimating the
full-time unemployment rate EXCEPT:
(A) The percentage of women in the work force.
(B) The ratio of the number of unemployed workers to the number
of vacant positions.
(C) The strength of inflationary tendencies in the economic system.
(D) The number of young people in the job market.
(E) The availability of financial help for those who are out of
work.
Type: Detail of the Passage
(B). Choices A and D are both based on the fourth paragraph, where
the importance of the age (number of elderly workers) and gender-specific
(women's) shares of the work force is discussed. Choice C is implied
in the passage as a whole, particularly in the second and third
paragraphs, which discuss the need to vary the estimated full-time
unemployment rate as inflationary tendencies vary. The last paragraph
suggests choice E. Choice B, however, is clearly ruled out by the
last two sentences of paragraph 1.
3) The author is most likely
a(n):
(A) politician
(B) economist
(C) statistician
(D) journalist
(E) feminist
Type: Identity of the
author
(B). The author is clearly studied in the unemployment area and
has a full knowledge of historical trends and mathematics. Thus
he or she is likely to be an economist. He or she is unlikely to
be a politician, since there is no bias or ideology. The main focus
is the trends, not statistics, so (C), though close, is incorrect.
(D) is incorrect because the author is not discussing current events
and (E) is also incorrect because the author only discusses women’s
employment in the final paragraph and does not state any political
feeling on the issue.
4) The author believes that
a zero unemployment rate is:
(A) imminent
(B) plausible
(C) convincing
(D) unlikely
(E) impossible
Type: Tone
(E). The author states “One thing is certain: it cannot be
zero or even close to zero.” Thus, according to the author,
a zero unemployment rate is not something that can or ever will
happen. It is therefore impossible.
5) The purpose of the third
paragraph is to:
(A) explain how unemployment works.
(B) make a prediction about the unemployment rate.
(C) provide evidence for a statement made in paragraph 2.
(D) contribute to the overall message of the passage.
(E) define a trend in unemployment history.
Type: Function of a part
of the passage
(C). The second paragraph presents the issue of adjusting the full-time
unemployment rate over the years, but it is not until paragraph
3 that we understand why this needed to be done: the composition
of the labor force had changed. Therefore, the purpose of paragraph
3 is to provide evidence for a statement made in paragraph 2.
6) The passage implies that
the extension of unemployment insurance to new groups of workers
and the lengthening of the period for benefit payments may have
encouraged:
I. Layoffs of workers by employers.
II. Abandonment of unsatisfactory jobs by employees.
III. Longer periods of job hunting by unemployed workers.
(A) I only
(B) I and II only
(C) I and III only
(D) II and III only
(E) I, II, and III
Type: Inference
(E). All three possibilities are implied by the last sentence of
the passage. This is tricky. This question is essentially asking
what are the consequences of the demographic changes described in
the passage.
7) The passage provides information
to answer which of the following questions?
(A) Why is a zero unemployment rate unlikely ever to be attained?
(B) What is the likely future trend of the full-employment unemployment
rate?
(C) Why has the percentage of younger workers in the job market
increased?
(D) What rate of inflation is generally considered to be the highest
acceptable rate?
(E)To what extent do workers tend to quit their jobs as a result
of increased unemployment benefits?
Support for a premise
(A). The question in choice A is discussed in the first paragraph
of the passage. The other questions may all be raised by the information
provided in the passage, but none of them can be answered by the
passage.
8) The author’s attitude
toward the existence of a zero unemployment rate is one of
(A) perplexity
(B) uncertainty
(C) suspicion
(D) indignation
(E) disdain
Type: Tone
(C). In paragraph 1 the author says “… it cannot be zero
or even close to zero.” The author clearly does not believe
a zero unemployment rate is possible and even makes fun of the idea
by explaining what it would look like: “A zero unemployment
rate would mean that no one ever entered or re-entered the labor
force, that no one ever quit a job or was laid off, and that for
new entrants or re-entrants, the process of searching for a job
consumed no time.” ‘Suspicion’ is the best match
for the author’s feelings of the adjectives provided. (D) and
(E) are too extreme.
9) The purpose of the second
paragraph is to:
(A) explain the complex process in which a term was defined.
(B) express doubt about the validity of a term.
(C) provide statistical evidence for the resolution of a conflict.
(D) show the role of government in creating unemployment.
(E) defend a diverse group of definitions for one term.
Function of a part of
the passage
(A) The second paragraph shows how the full-time unemployment rate
was and is determined. It has changed over time and due to many
factors and opinions. Therefore it was a complex process in which
the term “full-time unemployment rate” was defined. (E)
is tricky, but the author has no bias about the definitions, and
simply presents them, without a defense.
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