Question 1

Wage contracts are often set for periods of up to three years.As a result,fluctuations in aggregate demand and aggregate supply tend to

Accepted Answer

A) cause changes in the amount of involuntary unemployment. 
B) cause greater inflexibility of wages. 
C) have no effect in labour markets until wages are renegotiated. 
D) clear the labour market. 
E) either increase or decrease the NAIRU. 
A) cause changes in the amount of involuntary unemployment. 
B) cause greater inflexibility of wages. 
C) have no effect in labour markets until wages are renegotiated. 
D) clear the labour market. 
E) either increase or decrease the NAIRU. A

Question 2

Suppose that next year 300 000 existing jobs in the economy are eliminated and 200 000 new jobs are created.The amount of unemployment will decline over that year if

Accepted Answer

A) more than 100 000 people drop out of the labour force. 
B) less than 100 000 people drop out of the labour force. 
C) less than 100 000 people join the labour force. 
D) more than 100 000 people join the labour force. 
E) more than 300 000 people join the labour force. 
A) more than 100 000 people drop out of the labour force. 
B) less than 100 000 people drop out of the labour force. 
C) less than 100 000 people join the labour force. 
D) more than 100 000 people join the labour force. 
E) more than 300 000 people join the labour force. A

Question 3

Which of the following best explains why a certain amount of unemployment may be socially desirable?

Accepted Answer

A) When some workers become unemployed it provides a chance for others in the labour force to become employed. 
B) Unemployed workers are able to benefit from employment insurance. 
C) The time spent unemployed by the worker is valuable for finding the most appropriate match with firms. 
D) A pool of unemployed workers drives down the average wage in the economy,and keeps workers from becoming greedy. 
E) A pool of unemployed workers provides an incentive to those employed to remain productive. 
A) When some workers become unemployed it provides a chance for others in the labour force to become employed. 
B) Unemployed workers are able to benefit from employment insurance. 
C) The time spent unemployed by the worker is valuable for finding the most appropriate match with firms. 
D) A pool of unemployed workers drives down the average wage in the economy,and keeps workers from becoming greedy. 
E) A pool of unemployed workers provides an incentive to those employed to remain productive. C

Question 4

The table below provides hypothetical unemployment,employment,and labour force data for a small economy over a 3-month period.The unemployment rate on January 1 is 6%.
   TABLE 30-1
-Refer to Table 30-1.Between February 1 and March 1 the stock of unemployment remained stable at 750,and the unemployment rate ________ because ________.

Accepted Answer

A) decreased; the labour force grew by 600 
B) decreased; the labour force shrank by 600 
C) remained stable; the stock of unemployment did not change 
D) increased; the labour force grew by 600 
E) increased; the labour force shrank by 600 
A) decreased; the labour force grew by 600 
B) decreased; the labour force shrank by 600 
C) remained stable; the stock of unemployment did not change 
D) increased; the labour force grew by 600 
E) increased; the labour force shrank by 600

Question 5

An unemployed worker can be identified as being "structurally" unemployed if

Accepted Answer

A) minimum wage laws prevent the worker from finding a job. 
B) the worker has a different set of skills than what is desired by firms. 
C) the worker quits a job in order to search for a better one. 
D) the worker wants to work only during certain months of the year. 
E) there is a recession and the worker is laid off. 
A) minimum wage laws prevent the worker from finding a job. 
B) the worker has a different set of skills than what is desired by firms. 
C) the worker quits a job in order to search for a better one. 
D) the worker wants to work only during certain months of the year. 
E) there is a recession and the worker is laid off.

Question 6

If there are more job vacancies in the economy than there are unemployed workers,it is likely that

Accepted Answer

A) fiscal policy aimed at increasing aggregate demand would cause the actual unemployment rate to move toward the NAIRU. 
B) the actual unemployment rate is less than the NAIRU. 
C) the economy has a high NAIRU. 
D) there is excessive involuntary unemployment in this economy. 
E) there is no structural unemployment in this economy. 
A) fiscal policy aimed at increasing aggregate demand would cause the actual unemployment rate to move toward the NAIRU. 
B) the actual unemployment rate is less than the NAIRU. 
C) the economy has a high NAIRU. 
D) there is excessive involuntary unemployment in this economy. 
E) there is no structural unemployment in this economy.

Question 7

If there were an increase in the share of the labour force that is unionized,it would likely lead to ________ wage flexibility,which would ________ the NAIRU.

Accepted Answer

A) more; increase 
B) more; decrease 
C) less; increase 
D) less; decrease 
E) less; not change 
A) more; increase 
B) more; decrease 
C) less; increase 
D) less; decrease 
E) less; not change

Question 8

The table below provides hypothetical unemployment,employment,and labour force data for an economy over a 3-month period.
   TABLE 30-2
-Refer to Table 30-2.Which of the following changes occurred in this economy between February 1 and March 1?

Accepted Answer

A) The labour force remained stable. 
B) The unemployment rate declined. 
C) The unemployment rate remained stable. 
D) 200 000 (net)workers entered the labour force. 
E) 200 000 (net)workers left the labour force. 
A) The labour force remained stable. 
B) The unemployment rate declined. 
C) The unemployment rate remained stable. 
D) 200 000 (net)workers entered the labour force. 
E) 200 000 (net)workers left the labour force.

Question 9

Suppose in a given month the flow out of unemployment equals 300 000 per month,and the flow into unemployment equals 330 000 per month.The rate of unemployment has

Accepted Answer

A) increased by 30 000. 
B) decreased by 30 000. 
C) increased by 10%. 
D) decreased by 10%. 
E) Not enough information to determine. 
A) increased by 30 000. 
B) decreased by 30 000. 
C) increased by 10%. 
D) decreased by 10%. 
E) Not enough information to determine.

Question 10

When one worker is unemployed for one year,

Accepted Answer

A) we no longer include that worker in labour-force statistics. 
B) there may be significant personal costs,but there is no cost to the economy. 
C) it is not a problem because as soon as the worker is employed again,any loss of output goes away. 
D) there is no effect on national income. 
E) the output this worker would have produced is lost forever. 
A) we no longer include that worker in labour-force statistics. 
B) there may be significant personal costs,but there is no cost to the economy. 
C) it is not a problem because as soon as the worker is employed again,any loss of output goes away. 
D) there is no effect on national income. 
E) the output this worker would have produced is lost forever.

Question 11

The best description of the cause of "cyclical" unemployment is that

Accepted Answer

A) firms engage in race,gender and sex discrimination in their hiring practices. 
B) some individuals do not have marketable skills for the jobs that do exist. 
C) the AD curve shifts to the right. 
D) the level of overall economic activity falls below its potential level. 
E) workers often voluntarily quit a job to look for a better job. 
A) firms engage in race,gender and sex discrimination in their hiring practices. 
B) some individuals do not have marketable skills for the jobs that do exist. 
C) the AD curve shifts to the right. 
D) the level of overall economic activity falls below its potential level. 
E) workers often voluntarily quit a job to look for a better job.

Question 12

Empirical observation of employment and real-wage fluctuations over the business cycle in Canada and other developed countries

Accepted Answer

A) is not able to refute the market-clearing theory of unemployment. 
B) shows that employment is volatile and real wages are not. 
C) shows that real wages are volatile and employment levels are not. 
D) supports the market-clearing theory that there is no involuntary unemployment. 
E) supports the market-clearing theory that labour markets always clear. 
A) is not able to refute the market-clearing theory of unemployment. 
B) shows that employment is volatile and real wages are not. 
C) shows that real wages are volatile and employment levels are not. 
D) supports the market-clearing theory that there is no involuntary unemployment. 
E) supports the market-clearing theory that labour markets always clear.

Question 13

Suppose that unemployed workers searching to replace their lost jobs become discouraged and so decide to temporarily give up the search.Such a decision

Accepted Answer

A) increases the NAIRU. 
B) decreases the NAIRU. 
C) increases the official unemployment rate. 
D) decreases the official unemployment rate. 
E) has no effect on the official unemployment rate. 
A) increases the NAIRU. 
B) decreases the NAIRU. 
C) increases the official unemployment rate. 
D) decreases the official unemployment rate. 
E) has no effect on the official unemployment rate.

Question 14

The table below provides hypothetical unemployment,employment,and labour force data for a small economy over a 3-month period.The unemployment rate on January 1 is 6%.
   TABLE 30-1
-Refer to Table 30-1.What is the unemployment rate on March 1?

Accepted Answer

A) 6.0% 
B) 7.11% 
C) 10.07% 
D) 7.65% 
E) 4.17% 
A) 6.0% 
B) 7.11% 
C) 10.07% 
D) 7.65% 
E) 4.17%

Question 15

In macroeconomic models,the idea that NAIRU can be influenced by the actual rate of unemployment is referred to as

Accepted Answer

A) efficiency-wage unemployment. 
B) hysteresis. 
C) the market-clearing theory. 
D) rational expectations. 
E) the Phillips curve. 
A) efficiency-wage unemployment. 
B) hysteresis. 
C) the market-clearing theory. 
D) rational expectations. 
E) the Phillips curve.

Question 16

Non-market-clearing theories of the labour market feature ________ wages,and thus involuntary unemployment ________.

Accepted Answer

A) perfectly flexible; cannot exist 
B) perfectly flexible; can exist 
C) sticky; cannot exist 
D) sticky; can exist 
E) efficiency wages; cannot exist 
A) perfectly flexible; cannot exist 
B) perfectly flexible; can exist 
C) sticky; cannot exist 
D) sticky; can exist 
E) efficiency wages; cannot exist

Question 17

Suppose a free-trade agreement with Central America eliminates all tariffs on imported textiles from those countries.Which type of unemployment will be affected in Canada?

Accepted Answer

A) frictional unemployment 
B) structural unemployment 
C) cyclical unemployment 
D) seasonal unemployment 
E) hidden unemployment 
A) frictional unemployment 
B) structural unemployment 
C) cyclical unemployment 
D) seasonal unemployment 
E) hidden unemployment

Question 18

Which of the following would be the most appropriate policy for reducing structural unemployment?

Accepted Answer

A) a combination of tax cuts and increased government spending 
B) a decrease in the money supply 
C) an increase in the money supply 
D) increased benefits for workers covered by employment insurance 
E) introduction of programs for the retraining and relocation of labour 
A) a combination of tax cuts and increased government spending 
B) a decrease in the money supply 
C) an increase in the money supply 
D) increased benefits for workers covered by employment insurance 
E) introduction of programs for the retraining and relocation of labour

Question 19

The theory of "efficiency wages" provides

Accepted Answer

A) a way in which firms can pay workers less than the market-clearing wage. 
B) an explanation for the high wages that unions are able to extract from firms. 
C) many firms with a good reason to dismiss workers. 
D) most workers with a good reason to quit. 
E) one explanation for why wages do not readily fall in response to excess supply in labour markets. 
A) a way in which firms can pay workers less than the market-clearing wage. 
B) an explanation for the high wages that unions are able to extract from firms. 
C) many firms with a good reason to dismiss workers. 
D) most workers with a good reason to quit. 
E) one explanation for why wages do not readily fall in response to excess supply in labour markets.

Question 20

The theory of "efficiency wages" suggests that a pool of involuntarily unemployed workers

Accepted Answer

A) quickly disappears because perfectly-flexible wages eliminates this inefficient waste of resources. 
B) exists only between sessions of wage re-negotiation. 
C) is comprised solely of workers who have failed to meet the productivity standards of potential employers. 
D) is irrelevant to the behaviour of employed workers. 
E) provides an incentive for employees to work hard so they are not laid off. 
A) quickly disappears because perfectly-flexible wages eliminates this inefficient waste of resources. 
B) exists only between sessions of wage re-negotiation. 
C) is comprised solely of workers who have failed to meet the productivity standards of potential employers. 
D) is irrelevant to the behaviour of employed workers. 
E) provides an incentive for employees to work hard so they are not laid off.

Exam 30: Unemployment Fluctuations and the Nairu

Wage contracts are often set for periods of up to three years.As a result,fluctuations in aggregate demand and aggregate supply tend to

Suppose that next year 300 000 existing jobs in the economy are eliminated and 200 000 new jobs are created.The amount of unemployment will decline over that year if

Which of the following best explains why a certain amount of unemployment may be socially desirable?

An unemployed worker can be identified as being "structurally" unemployed if

If there are more job vacancies in the economy than there are unemployed workers,it is likely that

If there were an increase in the share of the labour force that is unionized,it would likely lead to ________ wage flexibility,which would ________ the NAIRU.

The table below provides hypothetical unemployment,employment,and labour force data for an economy over a 3-month period. TABLE 30-2 -Refer to Table 30-2.Which of the following changes occurred in this economy between February 1 and March 1?

Suppose in a given month the flow out of unemployment equals 300 000 per month,and the flow into unemployment equals 330 000 per month.The rate of unemployment has

When one worker is unemployed for one year,

The best description of the cause of "cyclical" unemployment is that

Empirical observation of employment and real-wage fluctuations over the business cycle in Canada and other developed countries

Suppose that unemployed workers searching to replace their lost jobs become discouraged and so decide to temporarily give up the search.Such a decision

The table below provides hypothetical unemployment,employment,and labour force data for a small economy over a 3-month period.The unemployment rate on January 1 is 6%. TABLE 30-1 -Refer to Table 30-1.What is the unemployment rate on March 1?

In macroeconomic models,the idea that NAIRU can be influenced by the actual rate of unemployment is referred to as

Non-market-clearing theories of the labour market feature ________ wages,and thus involuntary unemployment ________.

Suppose a free-trade agreement with Central America eliminates all tariffs on imported textiles from those countries.Which type of unemployment will be affected in Canada?

Which of the following would be the most appropriate policy for reducing structural unemployment?

The theory of "efficiency wages" provides

The theory of "efficiency wages" suggests that a pool of involuntarily unemployed workers

Economic Issues and Concepts

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Elasticity

Price Controls and Market Efficiency

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

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Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

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Labour Markets and Income Inequality

Interest Rates and the Capital Market

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The Economics of Environmental Protection

Taxation and Public Expenditure

What Macroeconomics Is All About

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Adding Government and Trade to the Simple Macro Model

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From the Short Run to the Long Run: The Adjustment of Factor Prices

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Filters

If there were an increase in the share of the labour force that is unionized,it would likely lead to wage flexibility,which would the NAIRU.

Non-market-clearing theories of the labour market feature wages,and thus involuntary unemployment .