Question 1

Based on the predictions of the two-sided search model, the Beveridge curve

Accepted Answer

A)  could be explained by changes to Employment Insurance, but this is not plausible in reality. 
B)  could be explained by changes to Employment Insurance that are plausible in reality. 
C)  is a feature the model fails to explain. 
D)  is plausible in reality but is not consistent with the model. 
E)  is neither plausible in reality or consistent with the model. 
A)  could be explained by changes to Employment Insurance, but this is not plausible in reality. 
B)  could be explained by changes to Employment Insurance that are plausible in reality. 
C)  is a feature the model fails to explain. 
D)  is plausible in reality but is not consistent with the model. 
E)  is neither plausible in reality or consistent with the model.

Question 2

A key determinant of the unemployment rate is

Accepted Answer

A)  labour market unrest. 
B)  nominal interest rates. 
C)  aggregate consumption. 
D)  aggregate economic activity. 
E)  the participation rate. 
A)  labour market unrest. 
B)  nominal interest rates. 
C)  aggregate consumption. 
D)  aggregate economic activity. 
E)  the participation rate.

Question 3

The probability of finding a job in the two-sided search model is

Accepted Answer

A)  decreasing in the efficiency of the matching function. 
B)  increasing in market tightness. 
C)  increasing in the ratio of consumers searching to firms. 
D)  decreasing in market tightness. 
E)  constant across all levels of market tightness. 
A)  decreasing in the efficiency of the matching function. 
B)  increasing in market tightness. 
C)  increasing in the ratio of consumers searching to firms. 
D)  decreasing in market tightness. 
E)  constant across all levels of market tightness.

Question 4

In the two-sided search model, the size of the labour force is positively related to

Accepted Answer

A)  the expected payoff to searching for work. 
B)  the population growth rate. 
C)  the ratio of males to females in the labour force. 
D)  the expected cost to searching for work. 
E)  the benefits of non-participation. 
A)  the expected payoff to searching for work. 
B)  the population growth rate. 
C)  the ratio of males to females in the labour force. 
D)  the expected cost to searching for work. 
E)  the benefits of non-participation.

Question 5

In the one-sided search model, if the employment insurance benefit goes down,

Accepted Answer

A)  the reservation wage goes up and long-run unemployment goes down. 
B)  the reservation wage goes down and long-run unemployment goes down. 
C)  the reservation wage and long-run unemployment are unchanged. 
D)  the reservation wage goes up and long-run unemployment goes up. 
E)  the reservation wage goes down and long-run unemployment goes up. 
A)  the reservation wage goes up and long-run unemployment goes down. 
B)  the reservation wage goes down and long-run unemployment goes down. 
C)  the reservation wage and long-run unemployment are unchanged. 
D)  the reservation wage goes up and long-run unemployment goes up. 
E)  the reservation wage goes down and long-run unemployment goes up.

Question 6

In the two-sided search model, labour market tightness

Accepted Answer

A)  is eliminated by employment insurance. 
B)  affects the chances of finding a job. 
C)  is irrelevant for the labour force participation decision. 
D)  reduces the reservation wage. 
E)  is irrelevant for firms' decisions. 
A)  is eliminated by employment insurance. 
B)  affects the chances of finding a job. 
C)  is irrelevant for the labour force participation decision. 
D)  reduces the reservation wage. 
E)  is irrelevant for firms' decisions.

Question 7

Government-sponsored Employment Insurance programs typically

Accepted Answer

A)  reduce the unemployment rate because they boost worker morale. 
B)  reduce the unemployment rate because they increase the net marginal product of labour. 
C)  increase the unemployment rate by increasing the number of spells of unemployment. 
D)  increase the unemployment rate by increasing the average duration of unemployment. 
E)  increase the unemployment rate by increasing the net marginal product of labour. 
A)  reduce the unemployment rate because they boost worker morale. 
B)  reduce the unemployment rate because they increase the net marginal product of labour. 
C)  increase the unemployment rate by increasing the number of spells of unemployment. 
D)  increase the unemployment rate by increasing the average duration of unemployment. 
E)  increase the unemployment rate by increasing the net marginal product of labour.

Question 8

According to the two-sided search model, in equilibrium labour market tightness tends to be high when

Accepted Answer

A)  the cost of a vacancy is high relative to the firm's share of the surplus. 
B)  employment insurance benefits are high relative to the productivity of a match. 
C)  profits are close to zero. 
D)  the firm's share of the surplus is high relative to the cost of a vacancy. 
E)  the firm's share of the surplus is increasing in market tightness. 
A)  the cost of a vacancy is high relative to the firm's share of the surplus. 
B)  employment insurance benefits are high relative to the productivity of a match. 
C)  profits are close to zero. 
D)  the firm's share of the surplus is high relative to the cost of a vacancy. 
E)  the firm's share of the surplus is increasing in market tightness.

Question 9

In the one-sided search model, the welfare of an unemployed worker

Accepted Answer

A)  is independent of employment insurance benefits. 
B)  increases with the size of the employment insurance benefit. 
C)  decreases as market wages increase. 
D)  depends only on government intervention in labour markets. 
E)  is irrelevant. 
A)  is independent of employment insurance benefits. 
B)  increases with the size of the employment insurance benefit. 
C)  decreases as market wages increase. 
D)  depends only on government intervention in labour markets. 
E)  is irrelevant.

Question 10

The participation rate tends to be procyclical because

Accepted Answer

A)  the size of the labour force is procyclical. 
B)  the sizes of both the labour force and the total population are procyclical. 
C)  the size of the labour force is procyclical and the size of the total population is countercyclical. 
D)  the unemployment rate is countercyclical. 
E)  employment is procyclical. 
A)  the size of the labour force is procyclical. 
B)  the sizes of both the labour force and the total population are procyclical. 
C)  the size of the labour force is procyclical and the size of the total population is countercyclical. 
D)  the unemployment rate is countercyclical. 
E)  employment is procyclical.

Question 11

In the two-sided search model, firms continue posting vacancies until the probability of matching with a worker is equal to

Accepted Answer

A)  the ratio of the cost of posting a vacancy to the profits from a match. 
B)  the marginal product of labour. 
C)  the real wage rate. 
D)  the ratio of the profits from a match to the number of matches. 
E)  the unemployment rate. 
A)  the ratio of the cost of posting a vacancy to the profits from a match. 
B)  the marginal product of labour. 
C)  the real wage rate. 
D)  the ratio of the profits from a match to the number of matches. 
E)  the unemployment rate.

Question 12

There has been considerable debate as to the appropriate level of Employment Insurance benefits paid out to unemployed workers. What do models of labour market search tell us about the effects of employment insurance benefits and their effects on the economy. Explain what conclusions we can draw concerning the optimal generosity of the employment insurance program.

Accepted Answer

In the one-sided search model, more gene

Question 13

The reservation wage

Accepted Answer

A)  is the wage paid to the reserve army of the unemployed. 
B)  cannot be higher than the employment insurance benefit. 
C)  should be the same as the employment insurance benefit, if employment insurance is to be efficient. 
D)  is the wage at which an unemployed worker is just indifferent to accepting a job and turning it down. 
E)  is the wage paid in the government sector. 
A)  is the wage paid to the reserve army of the unemployed. 
B)  cannot be higher than the employment insurance benefit. 
C)  should be the same as the employment insurance benefit, if employment insurance is to be efficient. 
D)  is the wage at which an unemployed worker is just indifferent to accepting a job and turning it down. 
E)  is the wage paid in the government sector.

Question 14

The participation rate is defined as

Accepted Answer

A)    
B)    
C)    
D)    
E)    
A)    
B)    
C)    
D)    
E)

Question 15

In the two-sided search model, the expected payoff to searching for work

Accepted Answer

A)  depends on the reservation wage. 
B)  increases with the employment insurance benefit and decreases with the market wage. 
C)  decreases with the employment insurance benefit and increases with the market wage. 
D)  increases with the employment insurance benefit and increases with the market wage. 
E)  decreases with labour market tightness. 
A)  depends on the reservation wage. 
B)  increases with the employment insurance benefit and decreases with the market wage. 
C)  decreases with the employment insurance benefit and increases with the market wage. 
D)  increases with the employment insurance benefit and increases with the market wage. 
E)  decreases with labour market tightness.

Question 16

In the one-sided search model, if the employment insurance benefit goes down,

Accepted Answer

A)  the reservation wage goes down. 
B)  the reservation wage goes up. 
C)  the welfare of the unemployed goes up. 
D)  the government sector shrinks. 
E)  the labour theory of value comes into play. 
A)  the reservation wage goes down. 
B)  the reservation wage goes up. 
C)  the welfare of the unemployed goes up. 
D)  the government sector shrinks. 
E)  the labour theory of value comes into play.

Question 17

Which of the following statements is the most accurate about the behaviour of the unemployment rate in Canada?

Accepted Answer

A)  Both the cyclical behaviour of the unemployment rate and the trend behaviour of the unemployment rate are well explained by changes in the level of aggregate economic activity. 
B)  The cyclical behaviour of the unemployment rate is well explained by changes in the level of aggregate economic activity, and the trend behaviour of the unemployment rate is well explained by demographic factors. 
C)  the cyclical behaviour of the unemployment rate is well explained by demographic factors, and the trend behaviour of the unemployment rate is well explained by changes in the level of aggregate economic activity. 
D)  Both the cyclical behaviour of the unemployment rate and the trend behaviour of the unemployment rate are well explained by demographic factors. 
E)  Both the cyclical behaviour of the unemployment rate and the trend behaviour of the unemployment rate are not well explained by demographic factors. 
A)  Both the cyclical behaviour of the unemployment rate and the trend behaviour of the unemployment rate are well explained by changes in the level of aggregate economic activity. 
B)  The cyclical behaviour of the unemployment rate is well explained by changes in the level of aggregate economic activity, and the trend behaviour of the unemployment rate is well explained by demographic factors. 
C)  the cyclical behaviour of the unemployment rate is well explained by demographic factors, and the trend behaviour of the unemployment rate is well explained by changes in the level of aggregate economic activity. 
D)  Both the cyclical behaviour of the unemployment rate and the trend behaviour of the unemployment rate are well explained by demographic factors. 
E)  Both the cyclical behaviour of the unemployment rate and the trend behaviour of the unemployment rate are not well explained by demographic factors.

Question 18

A good example of a sectoral shift would be the

Accepted Answer

A)  loss of total Canadian employment to Mexico. 
B)  decrease in the size of manufacturing employment relative to service sector employment in Canada. 
C)  recent influx of immigrants to Canada. 
D)  expansion in the fraction of employees covered by Employment Insurance in Canada. 
E)  outsourcing of Canada's jobs to India. 
A)  loss of total Canadian employment to Mexico. 
B)  decrease in the size of manufacturing employment relative to service sector employment in Canada. 
C)  recent influx of immigrants to Canada. 
D)  expansion in the fraction of employees covered by Employment Insurance in Canada. 
E)  outsourcing of Canada's jobs to India.

Question 19

The matching function captures the difficulties in

Accepted Answer

A)  matching heterogeneous firms with heterogeneous workers. 
B)  matching capital with labour. 
C)  matching heterogeneous firms with homogeneous workers. 
D)  matching homogeneous firms with heterogeneous workers. 
E)  matching homogeneous firms with homogeneous workers. 
A)  matching heterogeneous firms with heterogeneous workers. 
B)  matching capital with labour. 
C)  matching heterogeneous firms with homogeneous workers. 
D)  matching homogeneous firms with heterogeneous workers. 
E)  matching homogeneous firms with homogeneous workers.

Question 20

According to the two-sided search model, in equilibrium the number of firms is

Accepted Answer

A)  negatively related to the cost of posting a vacancy. 
B)  negatively related to the productivity of a match. 
C)  positively related to the level of employment insurance benefits. 
D)  positively related to the cost of posting a vacancy. 
E)  the firm's share of the total surplus from a match. 
A)  negatively related to the cost of posting a vacancy. 
B)  negatively related to the productivity of a match. 
C)  positively related to the level of employment insurance benefits. 
D)  positively related to the cost of posting a vacancy. 
E)  the firm's share of the total surplus from a match.

Based on the predictions of the two-sided search model, the Beveridge curve

A key determinant of the unemployment rate is

The probability of finding a job in the two-sided search model is

In the two-sided search model, the size of the labour force is positively related to

In the one-sided search model, if the employment insurance benefit goes down,

In the two-sided search model, labour market tightness

Government-sponsored Employment Insurance programs typically

According to the two-sided search model, in equilibrium labour market tightness tends to be high when

In the one-sided search model, the welfare of an unemployed worker

The participation rate tends to be procyclical because

In the two-sided search model, firms continue posting vacancies until the probability of matching with a worker is equal to

The reservation wage

The participation rate is defined as

In the two-sided search model, the expected payoff to searching for work

In the one-sided search model, if the employment insurance benefit goes down,

Which of the following statements is the most accurate about the behaviour of the unemployment rate in Canada?

A good example of a sectoral shift would be the

The matching function captures the difficulties in

According to the two-sided search model, in equilibrium the number of firms is

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters

Exam 6: Search and Unemployment

Based on the predictions of the two-sided search model, the Beveridge curve

A key determinant of the unemployment rate is

The probability of finding a job in the two-sided search model is

In the two-sided search model, the size of the labour force is positively related to

In the one-sided search model, if the employment insurance benefit goes down,

In the two-sided search model, labour market tightness

Government-sponsored Employment Insurance programs typically

According to the two-sided search model, in equilibrium labour market tightness tends to be high when

In the one-sided search model, the welfare of an unemployed worker

The participation rate tends to be procyclical because

In the two-sided search model, firms continue posting vacancies until the probability of matching with a worker is equal to

The reservation wage

The participation rate is defined as

In the two-sided search model, the expected payoff to searching for work

In the one-sided search model, if the employment insurance benefit goes down,

Which of the following statements is the most accurate about the behaviour of the unemployment rate in Canada?

A good example of a sectoral shift would be the

The matching function captures the difficulties in

According to the two-sided search model, in equilibrium the number of firms is

Introduction

Measurement

Business Cycle Measurement

Consumer and Firm Behaviour: The Work–Leisure Decision and Profit Maximization

A Closed-Economy One-Period Macroeconomic Model

Economic Growth: Malthus and Solow

Income Disparity among Countries and Endogenous Growth

A Two-Period Model: The Consumption–Savings Decision and Credit Markets

Credit Market Imperfections: Credit Frictions, Financial Crises, and Social Security

A Real Intertemporal Model with Investment

A Monetary Intertemporal Model: Money, Banking, Prices, and Monetary Policy

Business Cycle Models with Flexible Prices and Wages

New Keynesian Economics: Sticky Prices

Inflation: Phillips Curves and Neo-Fisherism

International Trade in Goods and Assets

Money in the Open Economy

Money, Inflation, and Banking: A Deeper Look

Filters