Question 1

A new policy is implemented that guarantees every adult an annual income of $10,000 whether they work or not. This will most likely shift the

Accepted Answer

A)  labor demand curve to the right. 
B)  labor supply curve to the left. 
C)  labor supply curve to the right. 
D)  labor demand curve to the left. 
A)  labor demand curve to the right. 
B)  labor supply curve to the left. 
C)  labor supply curve to the right. 
D)  labor demand curve to the left.

Question 2

If wages are sticky, a decrease in labor

Accepted Answer

A)  supply decreases the wage rate. 
B)  demand increases the wage rate. 
C)  demand decreases the wage rate. 
D)  none of the above 
A)  supply decreases the wage rate. 
B)  demand increases the wage rate. 
C)  demand decreases the wage rate. 
D)  none of the above

Question 3

Suppose that airline workers are laid off during a recession because of an unspoken agreement between airline workers and airline executives that wages will not be reduced. This example is consistent with the

Accepted Answer

A)  relative-wage explanation of unemployment. 
B)  explicit contract explanation of unemployment. 
C)  implicit contract explanation of unemployment. 
D)  efficiency wage explanation of unemployment. 
A)  relative-wage explanation of unemployment. 
B)  explicit contract explanation of unemployment. 
C)  implicit contract explanation of unemployment. 
D)  efficiency wage explanation of unemployment.

Question 4

As the unemployment rate increases in response to the economy moving away from capacity output, the aggregate price level

Accepted Answer

A)  is stable. 
B)  falls. 
C)  rises at an increasing rate. 
D)  rises at a declining rate. 
A)  is stable. 
B)  falls. 
C)  rises at an increasing rate. 
D)  rises at a declining rate.

Question 5

Suppose the equilibrium wage rate in the labor market is $20 and the demand for labor decreases. If wages are sticky, there will be a

Accepted Answer

A)  surplus of labor and the wage rate declines. 
B)  shortage of labor and the wage rate increases. 
C)  surplus of labor and the wage rate stays the same. 
D)  surplus of labor and the wage rate increases. 
A)  surplus of labor and the wage rate declines. 
B)  shortage of labor and the wage rate increases. 
C)  surplus of labor and the wage rate stays the same. 
D)  surplus of labor and the wage rate increases.

Question 6

If the actual unemployment rate is below NAIRU, the change in the inflation rate will be positive.

Accepted Answer

A) True 
 B)False

Question 7

Employment tends to fall when

Accepted Answer

A)  aggregate output falls. 
B)  unemployment rises. 
C)  aggregate output rises. 
D)  labor productivity falls. 
A)  aggregate output falls. 
B)  unemployment rises. 
C)  aggregate output rises. 
D)  labor productivity falls.

Question 8

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 at Point A and the cost of inputs is fixed. A decrease in government spending could move the economy to Point

Accepted Answer

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

Question 9

If firms set wages too high, the result is unemployment.

Accepted Answer

A) True 
 B)False

Question 10

Refer to the information provided in Figure 28.4 below to answer the question(s) that follow.   Figure 28.4
-Refer to Figure 28.4. The demand for labor falls from D to D'. If firms enter into social, or implicit, contracts with workers not to cut wages, then the wage rate will remain at $10 and

Accepted Answer

A)  employment will fall to 150 million. 
B)  employment will fall to 200 million. 
C)  employment will remain at 300 million. 
D)  labor supply will decrease to restore the market to equilibrium. 
A)  employment will fall to 150 million. 
B)  employment will fall to 200 million. 
C)  employment will remain at 300 million. 
D)  labor supply will decrease to restore the market to equilibrium.

Question 11

If a person is not employed but is looking for work, she is in the labor force.

Accepted Answer

A) True 
 B)False

Question 12

If firms pay wages higher than the market clearing wage, their profits will be reduced.

Accepted Answer

A) True 
 B)False

Question 13

Refer to the information provided in Figure 28.3 below to answer the question(s) that follow.   Figure 28.3
-Refer to Figure 28.3. A minimum wage of $12

Accepted Answer

A)  will lead to unemployment of 10. 
B)  will lead to unemployment of 20. 
C)  will lead to unemployment of 40. 
D)  will have no effect because the minimum wage is set above the equilibrium wage and for a minimum wage to have any effect on the labor market it must be below the equilibrium wage. 
A)  will lead to unemployment of 10. 
B)  will lead to unemployment of 20. 
C)  will lead to unemployment of 40. 
D)  will have no effect because the minimum wage is set above the equilibrium wage and for a minimum wage to have any effect on the labor market it must be below the equilibrium wage.

Question 14

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. If unemployment is on the x-axis, which panel represents the long-run Phillips curve?

Accepted Answer

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

Question 15

If aggregate demand decreases and expectations regarding inflation remain constant

Accepted Answer

A)  the economy moves along the short-run Phillips curve. 
B)  the short-run Phillips curve shifts to the right. 
C)  the short-run Phillips curve shifts to the left. 
D)  the long-run Phillips curve shifts to the right. 
A)  the economy moves along the short-run Phillips curve. 
B)  the short-run Phillips curve shifts to the right. 
C)  the short-run Phillips curve shifts to the left. 
D)  the long-run Phillips curve shifts to the right.

Question 16

The economy experiences both a ________ price level and ________ unemployment when aggregate supply increases with aggregate demand stable.

Accepted Answer

A)  falling; falling 
B)  falling; rising 
C)  rising; rising 
D)  rising; falling 
A)  falling; falling 
B)  falling; rising 
C)  rising; rising 
D)  rising; falling

Question 17

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. According to classical economists if the wage rate is $6, the wage rate will ________ to eliminate the ________.

Accepted Answer

A)  decline; surplus 
B)  increase; shortage 
C)  decline; shortage 
D)  increase; surplus 
A)  decline; surplus 
B)  increase; shortage 
C)  decline; shortage 
D)  increase; surplus

Question 18

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 at Point B. What can possibly move the economy to Point E?

Accepted Answer

A)  a leftward shift in the AD curve 
B)  a rightward shift in the AD curve 
C)  a leftward shift in the AS curve 
D)  a rightward shift in the AS curve 
A)  a leftward shift in the AD curve 
B)  a rightward shift in the AD curve 
C)  a leftward shift in the AS curve 
D)  a rightward shift in the AS curve

Question 19

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 value people put on their leisure time increases, 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 20

In the long run, the Phillips curve will be vertical at the natural rate of unemployment if

Accepted Answer

A)  the long-run aggregate demand curve is vertical at potential output. 
B)  the long-run aggregate demand curve is horizontal at the natural rate of inflation. 
C)  the long-run aggregate supply curve is vertical at potential output. 
D)  the long-run supply curve is horizontal at the natural rate of inflation. 
A)  the long-run aggregate demand curve is vertical at potential output. 
B)  the long-run aggregate demand curve is horizontal at the natural rate of inflation. 
C)  the long-run aggregate supply curve is vertical at potential output. 
D)  the long-run supply curve is horizontal at the natural rate of inflation.

Exam 28: The Labor Market in the Macroeconomy

A new policy is implemented that guarantees every adult an annual income of $10,000 whether they work or not. This will most likely shift the

If wages are sticky, a decrease in labor

Suppose that airline workers are laid off during a recession because of an unspoken agreement between airline workers and airline executives that wages will not be reduced. This example is consistent with the

As the unemployment rate increases in response to the economy moving away from capacity output, the aggregate price level

Suppose the equilibrium wage rate in the labor market is $20 and the demand for labor decreases. If wages are sticky, there will be a

If the actual unemployment rate is below NAIRU, the change in the inflation rate will be positive.

Employment tends to fall when

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 at Point A and the cost of inputs is fixed. A decrease in government spending could move the economy to Point

If firms set wages too high, the result is unemployment.

Refer to the information provided in Figure 28.4 below to answer the question(s) that follow. Figure 28.4 -Refer to Figure 28.4. The demand for labor falls from D to D'. If firms enter into social, or implicit, contracts with workers not to cut wages, then the wage rate will remain at $10 and

If a person is not employed but is looking for work, she is in the labor force.

If firms pay wages higher than the market clearing wage, their profits will be reduced.

Refer to the information provided in Figure 28.3 below to answer the question(s) that follow. Figure 28.3 -Refer to Figure 28.3. A minimum wage of $12

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. If unemployment is on the x-axis, which panel represents the long-run Phillips curve?

If aggregate demand decreases and expectations regarding inflation remain constant

The economy experiences both a ________ price level and ________ unemployment when aggregate supply increases with aggregate demand stable.

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. According to classical economists if the wage rate is $6, the wage rate will ________ to eliminate 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. Suppose the economy is at Point B. What can possibly move the economy to Point E?

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 value people put on their leisure time increases, the equilibrium wage rate

In the long run, the Phillips curve will be vertical at the natural rate of unemployment if

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

The economy experiences both a price level and unemployment when aggregate supply increases with aggregate demand stable.

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. According to classical economists if the wage rate is $6, the wage rate will to eliminate the .