9 questions/ 13 minutes
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,
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
(D) an ideal matching of unemployed workers with the number and type of unfilled
(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
(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
4) The author believes that a zero unemployment
5) The purpose of the third paragraph is
(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.
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
(E)To what extent do workers tend to quit their jobs as a result of increased
8) The authors attitude
toward the existence of a zero unemployment rate is one of
9) The purpose of the second paragraph
(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.