Question 1

Economists who argue that the AS curve is vertical in the long run at potential GDP also argue that the Phillips curve in the long run is

Accepted Answer

A)  vertical at the natural rate of unemployment. 
B)  upward sloping. 
C)  downward sloping. 
D)  horizontal at the natural rate of inflation. 
A)  vertical at the natural rate of unemployment. 
B)  upward sloping. 
C)  downward sloping. 
D)  horizontal at the natural rate of inflation.

Question 2

If, as a result of imperfect information, firms set their wage rates ________ the market clearing wage rate, there will be a shortage of workers.

Accepted Answer

A)  above 
B)  below 
C)  at 
D)  above or below 
A)  above 
B)  below 
C)  at 
D)  above or below

Question 3

Those who believe that wages adjust ________ to clear the labor market also believe that the ________ curve is vertical.

Accepted Answer

A)  slowly; AD 
B)  quickly; AD 
C)  slowly; AS 
D)  quickly; AS 
A)  slowly; AD 
B)  quickly; AD 
C)  slowly; AS 
D)  quickly; AS

Question 4

If a new governmental policy decreases unemployment benefits, we would expect the labor ________ curve to shift to the ________.

Accepted Answer

A)  supply; right 
B)  demand; right 
C)  supply; left 
D)  demand; left 
A)  supply; right 
B)  demand; right 
C)  supply; left 
D)  demand; left

Question 5

Social contracts are ________ agreements between workers and firms that firms will not cut wages.

Accepted Answer

A)  formal 
B)  written 
C)  unspoken 
D)  union 
A)  formal 
B)  written 
C)  unspoken 
D)  union

Question 6

If the AS curve shifts from year to year, but the AD curve does not, then the Phillips curve would show

Accepted Answer

A)  a positive relationship between the inflation and unemployment rates. 
B)  a negative relationship between the inflation and unemployment rates. 
C)  no particular relationship between the inflation and unemployment rates. 
D)  a constant trade-off between the inflation and unemployment rates. 
A)  a positive relationship between the inflation and unemployment rates. 
B)  a negative relationship between the inflation and unemployment rates. 
C)  no particular relationship between the inflation and unemployment rates. 
D)  a constant trade-off between the inflation and unemployment rates.

Question 7

If a country has a population of 300 million, 135 million people employed and 15 million people looking for work, then its unemployment rate is

Accepted Answer

A)  5%. 
B)  10%. 
C)  15%. 
D)  35%. 
A)  5%. 
B)  10%. 
C)  15%. 
D)  35%.

Question 8

Efficiency wages are an explanation for the existence of unemployment.

Accepted Answer

A) True 
 B)False

Question 9

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 natural unemployment rate equals 6%, the unemployment rate at U2 could be

Accepted Answer

A)  4%. 
B)  5%. 
C)  6%. 
D)  7%. 
A)  4%. 
B)  5%. 
C)  6%. 
D)  7%.

Question 10

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. Panel A represents the typical shape of the

Accepted Answer

A)  short-run Phillips curve. 
B)  long-run Phillips curve. 
C)  short-run aggregate supply curve. 
D)  long-run aggregate supply curve. 
A)  short-run Phillips curve. 
B)  long-run Phillips curve. 
C)  short-run aggregate supply curve. 
D)  long-run aggregate supply curve.

Question 11

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. Which of the following can change the equilibrium wage rate from $9 to $15?

Accepted Answer

A)  The value people put on their leisure time increases. 
B)  The value of what firms produce decreases. 
C)  The productivity of workers decreases. 
D)  the value of what firms produce increases. 
A)  The value people put on their leisure time increases. 
B)  The value of what firms produce decreases. 
C)  The productivity of workers decreases. 
D)  the value of what firms produce increases.

Question 12

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 at Point B, the cost of raw material decreased dramatically, and the aggregate demand did not change, the economy could move to Point

Accepted Answer

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

Question 13

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 at Point A, a sudden increase in the price of oil without any change in the aggregate demand shifts the short-run Phillips curve (SRPC) from

Accepted Answer

A)  SRPC1 to SRPC2. 
B)  SRPC1 to SRPC3. 
C)  SRPC2 to SRPC1. 
D)  SRPC3 to SRPC1. 
A)  SRPC1 to SRPC2. 
B)  SRPC1 to SRPC3. 
C)  SRPC2 to SRPC1. 
D)  SRPC3 to SRPC1.

Question 14

If wages are sticky, an increase in labor

Accepted Answer

A)  demand decreases the wage rate. 
B)  supply increases the wage rate. 
C)  demand increases the wage rate. 
D)  demand leaves wage rates intact. 
A)  demand decreases the wage rate. 
B)  supply increases the wage rate. 
C)  demand increases the wage rate. 
D)  demand leaves wage rates intact.

Question 15

If a household member is not in the labor force, it is because he or she has decided his or her time is more valuable in nonmarket activities.

Accepted Answer

A) True 
 B)False

Question 16

An increase in the value people place on their actual time spent working will shift the labor ________ curve to the ________.

Accepted Answer

A)  supply; right 
B)  supply; left 
C)  demand; right 
D)  demand; left 
A)  supply; right 
B)  supply; left 
C)  demand; right 
D)  demand; left

Question 17

If aggregate demand increases while aggregate supply is stable, aggregate output will ________ and the unemployment rate will ________.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 18

The relative-wage explanation for the existence of downwardly sticky wages emphasizes

Accepted Answer

A)  unspoken agreements between workers and firms that firms will not cut wages. 
B)  the incentive that firms may have to hold wages above the market clearing rate. 
C)  employment contracts that stipulate workers' wages, usually for a period of one to three years. 
D)  the contention that workers in one industry may be unwilling to accept a wage cut, unless they know that workers in other firms and industries are receiving similar cuts. 
A)  unspoken agreements between workers and firms that firms will not cut wages. 
B)  the incentive that firms may have to hold wages above the market clearing rate. 
C)  employment contracts that stipulate workers' wages, usually for a period of one to three years. 
D)  the contention that workers in one industry may be unwilling to accept a wage cut, unless they know that workers in other firms and industries are receiving similar cuts.

Question 19

The fact that the Phillips curve broke down during the 1970s means that aggregate demand has no effect on inflation.

Accepted Answer

A) True 
 B)False

Question 20

The natural rate of unemployment is sometimes taken as the sum of frictional unemployment and structural unemployment.

Accepted Answer

A) True 
 B)False

Exam 28: The Labor Market in the Macroeconomy

Economists who argue that the AS curve is vertical in the long run at potential GDP also argue that the Phillips curve in the long run is

If, as a result of imperfect information, firms set their wage rates ________ the market clearing wage rate, there will be a shortage of workers.

Those who believe that wages adjust ________ to clear the labor market also believe that the ________ curve is vertical.

If a new governmental policy decreases unemployment benefits, we would expect the labor ________ curve to shift to the ________.

Social contracts are ________ agreements between workers and firms that firms will not cut wages.

If the AS curve shifts from year to year, but the AD curve does not, then the Phillips curve would show

If a country has a population of 300 million, 135 million people employed and 15 million people looking for work, then its unemployment rate is

Efficiency wages are an explanation for the existence of 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 natural unemployment rate equals 6%, the unemployment rate at U2 could be

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. Panel A represents the typical shape of the

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. Which of the following can change the equilibrium wage rate from $9 to $15?

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 at Point B, the cost of raw material decreased dramatically, and the aggregate demand did not change, the economy could move to Point

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 at Point A, a sudden increase in the price of oil without any change in the aggregate demand shifts the short-run Phillips curve (SRPC) from

If wages are sticky, an increase in labor

If a household member is not in the labor force, it is because he or she has decided his or her time is more valuable in nonmarket activities.

An increase in the value people place on their actual time spent working will shift the labor ________ curve to the ________.

If aggregate demand increases while aggregate supply is stable, aggregate output will ________ and the unemployment rate will ________.

The relative-wage explanation for the existence of downwardly sticky wages emphasizes

The fact that the Phillips curve broke down during the 1970s means that aggregate demand has no effect on inflation.

The natural rate of unemployment is sometimes taken as the sum of frictional unemployment and structural unemployment.

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

Those who believe that wages adjust to clear the labor market also believe that the curve is vertical.

If a new governmental policy decreases unemployment benefits, we would expect the labor curve to shift to the .

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 natural unemployment rate equals 6%, the unemployment rate at U₂ could be

An increase in the value people place on their actual time spent working will shift the labor curve to the .

If aggregate demand increases while aggregate supply is stable, aggregate output will and the unemployment rate will .