Question 1

To be unemployed, a person must be without a job and actively looking for work.

Accepted Answer

A) True 
 B)False

Question 2

The classical view of the labor market is basically consistent with the assumption of a vertical (or almost vertical) ________ curve.

Accepted Answer

A)  production possibility 
B)  aggregate expenditures 
C)  aggregate demand 
D)  aggregate supply 
A)  production possibility 
B)  aggregate expenditures 
C)  aggregate demand 
D)  aggregate supply

Question 3

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. The unemployment rate at U1

Accepted Answer

A)  is greater than the natural rate. 
B)  is lower than the natural rate. 
C)  equals the natural rate. 
D)  equals zero. 
A)  is greater than the natural rate. 
B)  is lower than the natural rate. 
C)  equals the natural rate. 
D)  equals zero.

Question 4

In the classical view of the labor market, it is implied that unemployment does not exist.

Accepted Answer

A) True 
 B)False

Question 5

If the minimum wage is set above the market clearing wage, wages will be "sticky" in the downward direction.

Accepted Answer

A) True 
 B)False

Question 6

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. Suppose the economy is initially at Point A. A contractionary fiscal policy moves the economy to Point ________ in the short run.

Accepted Answer

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

Question 7

According to the classical theory, a contractionary monetary policy ________ the price level and ________ output in the long run.

Accepted Answer

A)  decreases; increases 
B)  decreases; doesn't change 
C)  increases; increases 
D)  doesn't change; doesn't change 
A)  decreases; increases 
B)  decreases; doesn't change 
C)  increases; increases 
D)  doesn't change; doesn't change

Question 8

If aggregate supply changes when aggregate demand is stable, then the Phillips curve is negatively sloped.

Accepted Answer

A) True 
 B)False

Question 9

What sequence of events results from an increase in aggregate demand?

Accepted Answer

A)  The price level falls, inventories decline, firms respond by increasing output and employment. 
B)  The price level falls, inventories increase, firms respond by reducing output and employment. 
C)  The price level rises, inventories decline, firms respond by increasing output and employment. 
D)  The price level rises, inventories increase, firms respond by increasing output and employment. 
A)  The price level falls, inventories decline, firms respond by increasing output and employment. 
B)  The price level falls, inventories increase, firms respond by reducing output and employment. 
C)  The price level rises, inventories decline, firms respond by increasing output and employment. 
D)  The price level rises, inventories increase, firms respond by increasing output and employment.

Question 10

Frito Lay experienced a 20% drop in its sales. Even though the demand for its product decreased, Frito Lay did not cut the wages of its nonunionized workers. This is an example of

Accepted Answer

A)  an explicit contract not to cut wages. 
B)  employment-at-will. 
C)  poor management. 
D)  an implicit or social contract not to cut wages. 
A)  an explicit contract not to cut wages. 
B)  employment-at-will. 
C)  poor management. 
D)  an implicit or social contract not to cut wages.

Question 11

If unemployment is below the natural rate of unemployment, then output is below potential output.

Accepted Answer

A) True 
 B)False

Question 12

A vertical aggregate supply curve implies a vertical Phillips curve.

Accepted Answer

A) True 
 B)False

Question 13

Refer to the information provided in Figure 28.2 below to answer the question(s) that follow.   Figure 28.2
-Refer to Figure 28.2. If this firm pays the efficient wage of $9

Accepted Answer

A)  the firm's demand for labor will decrease until $9 is also the equilibrium wage. 
B)  the supply of labor will increase until $9 is also the equilibrium wage. 
C)  there will be an excess demand for labor of 3,000. 
D)  there will be an excess supply of labor of 3,000. 
A)  the firm's demand for labor will decrease until $9 is also the equilibrium wage. 
B)  the supply of labor will increase until $9 is also the equilibrium wage. 
C)  there will be an excess demand for labor of 3,000. 
D)  there will be an excess supply of labor of 3,000.

Question 14

Those who believe that the wage rate does not adjust quickly to clear the labor market are likely to believe that the aggregate supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 15

Classical economists believe that economic policies are ineffective because they don't affect aggregate demand in the economy.

Accepted Answer

A) True 
 B)False

Question 16

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. If the productivity of workers decreases, the equilibrium wage rate

Accepted Answer

A)  could change from $9 to $6. 
B)  could change from $9 to $15. 
C)  would stay at $15. 
D)  would increase to $15. 
A)  could change from $9 to $6. 
B)  could change from $9 to $15. 
C)  would stay at $15. 
D)  would increase to $15.

Question 17

Classical economists believe that when the aggregate supply curve is horizontal, monetary policy and fiscal policy will have no effect on real output.

Accepted Answer

A) True 
 B)False

Question 18

The downward rigidity of wages as an explanation for the existence of unemployment is known as

Accepted Answer

A)  sticky wages. 
B)  crashing wages. 
C)  locked wages. 
D)  minimum wages. 
A)  sticky wages. 
B)  crashing wages. 
C)  locked wages. 
D)  minimum wages.

Question 19

If aggregate supply decreases and aggregate demand remains unchanged

Accepted Answer

A)  there will be a positive relationship between the price level and the level of aggregate output. 
B)  there will be a negative relationship between the price level and the level of aggregate output. 
C)  there will be no systematic relationship between the price level and the level of aggregate output. 
D)  the price level will remain unchanged, but aggregate output will decrease. 
A)  there will be a positive relationship between the price level and the level of aggregate output. 
B)  there will be a negative relationship between the price level and the level of aggregate output. 
C)  there will be no systematic relationship between the price level and the level of aggregate output. 
D)  the price level will remain unchanged, but aggregate output will decrease.

Question 20

In the long run, the Phillips curve will be ________ at the natural rate of unemployment if the long-run aggregate supply curve is vertical at potential output.

Accepted Answer

A)  positively sloped 
B)  negatively sloped 
C)  vertical 
D)  horizontal 
A)  positively sloped 
B)  negatively sloped 
C)  vertical 
D)  horizontal

Exam 28: The Labor Market in the Macroeconomy

To be unemployed, a person must be without a job and actively looking for work.

The classical view of the labor market is basically consistent with the assumption of a vertical (or almost vertical) ________ curve.

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. The unemployment rate at U1

In the classical view of the labor market, it is implied that unemployment does not exist.

If the minimum wage is set above the market clearing wage, wages will be "sticky" in the downward direction.

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. Suppose the economy is initially at Point A. A contractionary fiscal policy moves the economy to Point ________ in the short run.

According to the classical theory, a contractionary monetary policy ________ the price level and ________ output in the long run.

If aggregate supply changes when aggregate demand is stable, then the Phillips curve is negatively sloped.

What sequence of events results from an increase in aggregate demand?

Frito Lay experienced a 20% drop in its sales. Even though the demand for its product decreased, Frito Lay did not cut the wages of its nonunionized workers. This is an example of

If unemployment is below the natural rate of unemployment, then output is below potential output.

A vertical aggregate supply curve implies a vertical Phillips curve.

Refer to the information provided in Figure 28.2 below to answer the question(s) that follow. Figure 28.2 -Refer to Figure 28.2. If this firm pays the efficient wage of $9

Those who believe that the wage rate does not adjust quickly to clear the labor market are likely to believe that the aggregate supply curve is vertical.

Classical economists believe that economic policies are ineffective because they don't affect aggregate demand in the economy.

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. If the productivity of workers decreases, the equilibrium wage rate

Classical economists believe that when the aggregate supply curve is horizontal, monetary policy and fiscal policy will have no effect on real output.

The downward rigidity of wages as an explanation for the existence of unemployment is known as

If aggregate supply decreases and aggregate demand remains unchanged

In the long run, the Phillips curve will be ________ at the natural rate of unemployment if the long-run aggregate supply curve is vertical at potential output.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Short-Run Costs and Output Decisions

Long-Run Costs and Output Decisions

Input Demand: The Labor and Land Markets

Input Demand: The Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: The Economics of Taxation

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

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. The unemployment rate at U₁

According to the classical theory, a contractionary monetary policy the price level and output in the long run.