Question 1

A beneficial supply shock increases labour demand.What happens to current employment and the real wage rate?

Accepted Answer

A) Both employment and the real wage rate would increase. 
B) Both employment and the real wage rate would decrease. 
C) Employment would increase and the real wage would decrease. 
D) Employment would decrease and the real wage would increase. 
A) Both employment and the real wage rate would increase. 
B) Both employment and the real wage rate would decrease. 
C) Employment would increase and the real wage would decrease. 
D) Employment would decrease and the real wage would increase.

Question 2

Under certain circumstances,the production function Y = AF(K,N)can be rewritten as Y = ANF(K,N).In this case,suppose that both K and N double.What happens to output?

Accepted Answer

A) It remains unchanged. 
B) It is reduced by one half. 
C) It is increased by a factor of 4. 
D) It doubles. 
A) It remains unchanged. 
B) It is reduced by one half. 
C) It is increased by a factor of 4. 
D) It doubles.

Question 3

The principle of diminishing marginal productivity of labour implies that

Accepted Answer

A) output diminishes as labour increases. 
B) output will decrease first,but it will increase as labour increases. 
C) output increases at diminishing rate as labour increases. 
D) output will increase first,but it will decrease as labour increases. 
A) output diminishes as labour increases. 
B) output will decrease first,but it will increase as labour increases. 
C) output increases at diminishing rate as labour increases. 
D) output will increase first,but it will decrease as labour increases.

Question 4

What is the unemployment rate if there are 170 million people employed,25 million people unemployed,and 35 million not in the labour force?

Accepted Answer

A) 14.7% 
B) 13.7% 
C) 12.8% 
D) 10.9% 
A) 14.7% 
B) 13.7% 
C) 12.8% 
D) 10.9%

Question 5

If there is an adverse supply shock,

Accepted Answer

A) the labour demand curve would shift leftward and,for any real wage,firms would demand more labour. 
B) the labour demand curve would shift leftward and,for any real wage,firms would demand less labour. 
C) the labour demand curve would shift rightward and,for any real wage,firms would demand more labour. 
D) the labour demand curve would shift rightward and,for any real wage,firms would demand less labour. 
A) the labour demand curve would shift leftward and,for any real wage,firms would demand more labour. 
B) the labour demand curve would shift leftward and,for any real wage,firms would demand less labour. 
C) the labour demand curve would shift rightward and,for any real wage,firms would demand more labour. 
D) the labour demand curve would shift rightward and,for any real wage,firms would demand less labour.

Question 6

Suppose the economy's production function is Y = AK⁰.³ᴺ⁰.⁷.If K = 1000 and N = 50,then
Y = 2000.What is Y if K = 2000 and N = 100?

Accepted Answer

A) 4000 
B) 3500 
C) 3400 
D) 3000 
A) 4000 
B) 3500 
C) 3400 
D) 3000

Question 7

A decrease in the real wage will cause an individual to increase his or her supply of labour if

Accepted Answer

A) the substitution effect is greater than the income effect. 
B) the income effect is greater than the substitution effect. 
C) the substitution effect is positive and the income effect is negative. 
D) the substitution effect is equal to the income effect. 
A) the substitution effect is greater than the income effect. 
B) the income effect is greater than the substitution effect. 
C) the substitution effect is positive and the income effect is negative. 
D) the substitution effect is equal to the income effect.

Question 8

A supply shock that reduces total factor productivity directly affects which term in the production function Y = AF(K,N)?

Accepted Answer

A) A 
B) F 
C) K 
D) N 
A) A 
B) F 
C) K 
D) N

Question 9

Parliament has just passed a law eliminating all mandatory retirement in Canada.How would you expect this to affect the nation's labour supply curve?

Accepted Answer

A) The labour supply curve would shift to the right. 
B) The labour supply curve would shift to the left. 
C) The labour supply curve would be unaffected. 
D) The labour demand curve would shift to the right. 
A) The labour supply curve would shift to the right. 
B) The labour supply curve would shift to the left. 
C) The labour supply curve would be unaffected. 
D) The labour demand curve would shift to the right.

Question 10

The empirical evidence that the aggregate amount of labour supplied declines in response to a permanent increase in the real wage confirms

Accepted Answer

A) the substitution effect of higher real wage. 
B) the income effect of higher real wage. 
C) both substitution and income effects of real wage. 
D) that substitution effect dominates income effect. 
A) the substitution effect of higher real wage. 
B) the income effect of higher real wage. 
C) both substitution and income effects of real wage. 
D) that substitution effect dominates income effect.

Question 11

What is the unemployment rate if there are 125 million people in the labour force,100 million people employed,and 25 million not in the labour force?

Accepted Answer

A) 25% 
B) 20% 
C) 17% 
D) 15% 
A) 25% 
B) 20% 
C) 17% 
D) 15%

Question 12

An adverse supply shock would

Accepted Answer

A) shift the production function up and decrease marginal products at every level of employment. 
B) shift the production function down and decrease marginal products at every level of employment. 
C) shift the production function down and increase marginal products at every level of employment. 
D) shift the production function up and increase marginal products at every level of employment. 
A) shift the production function up and decrease marginal products at every level of employment. 
B) shift the production function down and decrease marginal products at every level of employment. 
C) shift the production function down and increase marginal products at every level of employment. 
D) shift the production function up and increase marginal products at every level of employment.

Question 13

The city of Hope has a labour force of 1000.Twenty people lose their jobs each month and remain unemployed for exactly one month before finding jobs.On January 1,May 1,and September 1 of each year 50 people lose their jobs for a period of four months before finding new jobs.
a.What is the unemployment rate in any given month?
b.How many unemployment spells are there in a year?
c.What is the average duration of an unemployment spell?
d.On any given date,how many people are undergoing short spells,and how many are undergoing long spells?

Accepted Answer

a.70/1000 = 7%.
b.Short spells: 20 each

Question 14

An adverse supply shock,such as a reduced supply of raw materials,would

Accepted Answer

A) increase the marginal product of labour. 
B) decrease the marginal product of labour. 
C) decrease the marginal product of capital,but have no effect on the marginal product of labour. 
D) not affect the marginal product of labour. 
A) increase the marginal product of labour. 
B) decrease the marginal product of labour. 
C) decrease the marginal product of capital,but have no effect on the marginal product of labour. 
D) not affect the marginal product of labour.

Question 15

How would each of the following affect the current level of full-employment output? Explain.
a.The new government changes immigration policy to restrict the number of immigrants entering the country each year.
b.New technology allows massive production of oil and gas through fracking.
c.A hurricane of unprecedented strength hits the country leaving huge damages to residential and business properties and infrastructure.
d.Robots equipped with artificial intelligence are widely used in production.

Accepted Answer

a.Decrease

Question 16

The empirical evidence that the aggregate amount of labour supplied rises in response to a temporary increase in the real wage confirms

Accepted Answer

A) the substitution effect of higher real wage. 
B) the income effect of higher real wage. 
C) both substitution and income effects of real wage. 
D) that income effect dominates substitution effect. 
A) the substitution effect of higher real wage. 
B) the income effect of higher real wage. 
C) both substitution and income effects of real wage. 
D) that income effect dominates substitution effect.

Question 17

The Widget Company has the following production function:
$$\begin{array} { c c } 
\begin{array} { c } 
\text { Number of } \
\text { Workers }
\end{array} & \begin{array} { c } 
\text { Number of } \
\text { Widgets Produced }
\end{array} \
\hline 0 & 0 \
1 & 9 \
2 & 17 \
3 & 24 \
4 & 30 \
5 & 35
\end{array}$$
If widgets sell for $6 each and the wage rate is $33,how many workers will the company hire?

Accepted Answer

A) 0 
B) 1 
C) 2 
D) 4 
A) 0 
B) 1 
C) 2 
D) 4

Question 18

As a result of the superb economics essay that you wrote during this quarter,you win the Adam Smith prize of $100.The receipt of these funds would be an example of

Accepted Answer

A) the substitution effect being stronger than the income effect. 
B) the income effect being stronger than the substitution effect. 
C) a pure income effect. 
D) a pure substitution effect. 
A) the substitution effect being stronger than the income effect. 
B) the income effect being stronger than the substitution effect. 
C) a pure income effect. 
D) a pure substitution effect.

Question 19

When an economy is in full-employment equilibrium,

Accepted Answer

A) the natural rate of unemployment is zero. 
B) there is no frictional unemployment. 
C) cyclical unemployment is zero. 
D) the unemployment rate is zero. 
A) the natural rate of unemployment is zero. 
B) there is no frictional unemployment. 
C) cyclical unemployment is zero. 
D) the unemployment rate is zero.

Question 20

An individual's labour supply curve slopes upward because

Accepted Answer

A) an increase in the future real wage leads to an increase in the amount of labour supplied. 
B) an increase in the current real wage leads to a decrease in the amount of labour supplied. 
C) an increase in the future real wage leads to a decrease in the amount of labour supplied. 
D) an increase in the current real wage leads to an increase in the amount of labour supplied. 
A) an increase in the future real wage leads to an increase in the amount of labour supplied. 
B) an increase in the current real wage leads to a decrease in the amount of labour supplied. 
C) an increase in the future real wage leads to a decrease in the amount of labour supplied. 
D) an increase in the current real wage leads to an increase in the amount of labour supplied.

A beneficial supply shock increases labour demand.What happens to current employment and the real wage rate?

Under certain circumstances,the production function Y = AF(K,N)can be rewritten as Y = ANF(K,N).In this case,suppose that both K and N double.What happens to output?

The principle of diminishing marginal productivity of labour implies that

What is the unemployment rate if there are 170 million people employed,25 million people unemployed,and 35 million not in the labour force?

If there is an adverse supply shock,

Suppose the economy's production function is Y = AK⁰.³ᴺ⁰.⁷.If K = 1000 and N = 50,then Y = 2000.What is Y if K = 2000 and N = 100?

A decrease in the real wage will cause an individual to increase his or her supply of labour if

A supply shock that reduces total factor productivity directly affects which term in the production function Y = AF(K,N)?

Parliament has just passed a law eliminating all mandatory retirement in Canada.How would you expect this to affect the nation's labour supply curve?

The empirical evidence that the aggregate amount of labour supplied declines in response to a permanent increase in the real wage confirms

What is the unemployment rate if there are 125 million people in the labour force,100 million people employed,and 25 million not in the labour force?

An adverse supply shock would

An adverse supply shock,such as a reduced supply of raw materials,would

The empirical evidence that the aggregate amount of labour supplied rises in response to a temporary increase in the real wage confirms

The Widget Company has the following production function: Number of Workers Number of Widgets Produced 0 0 1 9 2 17 3 24 4 30 5 35 If widgets sell for $6 each and the wage rate is $33,how many workers will the company hire?

As a result of the superb economics essay that you wrote during this quarter,you win the Adam Smith prize of $100.The receipt of these funds would be an example of

When an economy is in full-employment equilibrium,

An individual's labour supply curve slopes upward because

Introduction to Macroeconomics

The Measurement and Structure of the Canadian Economy

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

The Is-Lm-Fe Model: a General Framework for Macroeconomic Analysis

Exchange Rates, business Cycles, and Macroeconomic Policy

Classical Business Cycle Analysis: Market-Clearing Macroeconomics

Keynesian Business Cycle Analysis: Non Market Clearing Macroeconomics

Unemployment and Inflation

Monetary Policy and the Bank of Canada

Government Spending and Its Financing

Filters

Exam 3: Productivity, output, and Employment

A beneficial supply shock increases labour demand.What happens to current employment and the real wage rate?

Under certain circumstances,the production function Y = AF(K,N)can be rewritten as Y = ANF(K,N).In this case,suppose that both K and N double.What happens to output?

The principle of diminishing marginal productivity of labour implies that

What is the unemployment rate if there are 170 million people employed,25 million people unemployed,and 35 million not in the labour force?

If there is an adverse supply shock,

Suppose the economy's production function is Y = AK⁰.³ᴺ⁰.⁷.If K = 1000 and N = 50,then Y = 2000.What is Y if K = 2000 and N = 100?

A decrease in the real wage will cause an individual to increase his or her supply of labour if

A supply shock that reduces total factor productivity directly affects which term in the production function Y = AF(K,N)?

Parliament has just passed a law eliminating all mandatory retirement in Canada.How would you expect this to affect the nation's labour supply curve?

The empirical evidence that the aggregate amount of labour supplied declines in response to a permanent increase in the real wage confirms

What is the unemployment rate if there are 125 million people in the labour force,100 million people employed,and 25 million not in the labour force?

An adverse supply shock would

An adverse supply shock,such as a reduced supply of raw materials,would

The empirical evidence that the aggregate amount of labour supplied rises in response to a temporary increase in the real wage confirms

The Widget Company has the following production function: Number of Workers Number of Widgets Produced 0 0 1 9 2 17 3 24 4 30 5 35 If widgets sell for $6 each and the wage rate is $33,how many workers will the company hire?

As a result of the superb economics essay that you wrote during this quarter,you win the Adam Smith prize of $100.The receipt of these funds would be an example of

When an economy is in full-employment equilibrium,

An individual's labour supply curve slopes upward because

Introduction to Macroeconomics

The Measurement and Structure of the Canadian Economy

Consumption, saving, and Investment

Saving and Investment in the Open Economy

Long-Run Economic Growth

The Asset Market, money, and Prices

Business Cycles

The Is-Lm-Fe Model: a General Framework for Macroeconomic Analysis

Exchange Rates, business Cycles, and Macroeconomic Policy

Classical Business Cycle Analysis: Market-Clearing Macroeconomics

Keynesian Business Cycle Analysis: Non Market Clearing Macroeconomics

Unemployment and Inflation

Monetary Policy and the Bank of Canada

Government Spending and Its Financing

Filters