Exam 28: The Labor Market in the Macroeconomy

Refer to the information provided in Figure 28.6 below to answer the question(s) that follow. Figure 28.6 -Refer to Figure 28.6. Assuming all shocks to the economy arise from demand changes, which panel represents the short-run relationship between output and the price level?

If you hear a person saying "I lost my job at the GM plant because car manufacturing is slow due to a slowdown in the economy," you should conclude that this person is ________ unemployed.

Refer to the information provided in Figure 28.1 below to answer the question(s) that follow. Figure 28.1 -Refer to Figure 28.1. At wage rate $15, there is a ________ of labor equal to ________ million people.

Structural unemployment arises when the economy changes making some jobs obsolete.

At the natural rate of unemployment, the economy can be considered to be at full employment.

Efficiency wage theory suggests that firms may hold wages ________ the market clearing rate because they believe that the productivity of workers ________ with the wage rate.

Refer to the information provided in Figure 28.8 below to answer the question(s) that follow. Figure 28.8 -Refer to Figure 28.8. Expected inflation equals 6%

The social contract explanation for the existence of downwardly sticky wages focuses on

The percentage of workers whose wages are set by explicit contracts falls. This should

The classical view of the labor market holds that unemployment in the economy consists of frictional and structural unemployment.

Refer to the information provided in Figure 28.7 below to answer the question(s) that follow. Figure 28.7 -Refer to Figure 28.7. If the economy is on SRPC₁, then the expected inflation rate is

According to classical economists, ________ unemployment does not persist in the economy because wages will always adjust to ensure equilibrium in the labor market.

Classical economists believe that the aggregate supply curve is vertical because

Suppose the wage rate in the labor market is $15 and the productivity of workers increases, which of the following statements is incorrect?

Which of the following may shift the labor demand curve?

The government lowers the marginal income tax rates so that after-tax wages are increased. This most likely will shift the labor

Even though explicit contracts may lead to layoffs during recessions, explicit contracts may still be efficient because such contracts

The Phillips curve suggests that if we want to raise the inflation rate, we must accept a higher unemployment rate in return.

To improve workers' morale, a firm pays higher wages for its workers. This firm is paying

If aggregate demand decreases while aggregate supply is stable, income will ________ and the unemployment rate will ________.