Question 1

Refer to the following figure when answering  
Figure 7.3: Labor Market  
-In the labor market depicted in Figure 7.3, investment in new physical capital:

Accepted Answer

A)  shifts labor supply from $L _ { 1 } ^ { S }$ to $L _ { 2 } ^ { S }$ 
B)  shifts labor supply from $L _ { 2 } ^ { S }$ to $L _ { 1 } ^ { S }$ 
C)  shifts labor demand from $L _ { 1 } ^ { D }$ to $L _ { 2 } ^ { D }$ 
D)  shifts labor demand from $L _ { 2 } ^ { D }$ to $L _ { 1 } ^ { D }$ 
E)  None of these answers are correct. 
A)  shifts labor supply from $L _ { 1 } ^ { S }$ to $L _ { 2 } ^ { S }$ 
B)  shifts labor supply from $L _ { 2 } ^ { S }$ to $L _ { 1 } ^ { S }$ 
C)  shifts labor demand from $L _ { 1 } ^ { D }$ to $L _ { 2 } ^ { D }$ 
D)  shifts labor demand from $L _ { 2 } ^ { D }$ to $L _ { 1 } ^ { D }$ 
E)  None of these answers are correct. D

Question 2

Refer to the following table when answering  
Table 7.2
 $$\begin{array} { c c c c } 
\hline & \begin{array} { c } 
\text { Separation } \
\text { rate }
\end{array} & \begin{array} { c } 
\text { Finding } \
\text { rate }
\end{array} & \begin{array} { c } 
\text { Labor } \
\text { force }
\end{array} \
\hline 2015 & 2 \% & 20 \% & 130 \
2016 & 2.5 \% & 15 \% & 100 \
\hline
\end{array}$$
-Consider the data in Table 7.2. In ________ the natural rate of unemployment was the higher of the two years at ________ percent.

Accepted Answer

A)  2016; 14.3 
B)  2015; 9.1 
C)  2015; 16.7 
D)  2016; 10 
E)  2015; 14.3 
A)  2016; 14.3 
B)  2015; 9.1 
C)  2015; 16.7 
D)  2016; 10 
E)  2015; 14.3 A

Question 3

If the income taxes on wages increase, the labor supply curve will shift left, but what happens to the unemployment rate?

Accepted Answer

A)  It unambiguously falls because the labor participation rate changes. 
B)  It unambiguously falls because some workers drop out of the workforce. 
C)  It unambiguously rises because some workers drop out of the workforce. 
D)  It is ambiguous because some workers drop out of the workforce. 
E)  None of these answers are correct. 
A)  It unambiguously falls because the labor participation rate changes. 
B)  It unambiguously falls because some workers drop out of the workforce. 
C)  It unambiguously rises because some workers drop out of the workforce. 
D)  It is ambiguous because some workers drop out of the workforce. 
E)  None of these answers are correct. D

Question 4

The natural rate of unemployment is decomposed into:

Accepted Answer

A)  cyclical and frictional unemployment 
B)  structural and seasonal unemployment 
C)  structural and frictional unemployment 
D)  seasonal and frictional unemployment 
E)  structural, frictional, and seasonal unemployment 
A)  cyclical and frictional unemployment 
B)  structural and seasonal unemployment 
C)  structural and frictional unemployment 
D)  seasonal and frictional unemployment 
E)  structural, frictional, and seasonal unemployment

Question 5

Unemployment is given by ________ and the natural rate of unemployment is ________.

Accepted Answer

A)  Frictional + Structural + Cyclical unemployment; Frictional + Structural unemployment 
B)  Frictional + Structural - Cyclical unemployment; Frictional + Structural unemployment 
C)  Frictional + Cyclical unemployment; Frictional + Cyclical unemployment 
D)  Structural + Cyclical unemployment; Structural unemployment 
E)  Cyclical unemployment; Frictional + Structural unemployment 
A)  Frictional + Structural + Cyclical unemployment; Frictional + Structural unemployment 
B)  Frictional + Structural - Cyclical unemployment; Frictional + Structural unemployment 
C)  Frictional + Cyclical unemployment; Frictional + Cyclical unemployment 
D)  Structural + Cyclical unemployment; Structural unemployment 
E)  Cyclical unemployment; Frictional + Structural unemployment

Question 6

Since the end of World War II, the percentage of women in the workforce has been falling.

Accepted Answer

A) True 
 B)False

Question 7

Cyclical unemployment is the unemployment that results from:

Accepted Answer

A)  prevailing labor market institutions 
B)  workers losing jobs during recession 
C)  workers changing jobs in a dynamic economy 
D)  workers losing jobs during seasonal changes 
E)  workers leaving the labor force 
A)  prevailing labor market institutions 
B)  workers losing jobs during recession 
C)  workers changing jobs in a dynamic economy 
D)  workers losing jobs during seasonal changes 
E)  workers leaving the labor force

Question 8

Refer to the following table when answering  
Table 7.2
 $$\begin{array} { c c c c } 
\hline & \begin{array} { c } 
\text { Separation } \
\text { rate }
\end{array} & \begin{array} { c } 
\text { Finding } \
\text { rate }
\end{array} & \begin{array} { c } 
\text { Labor } \
\text { force }
\end{array} \
\hline 2015 & 2 \% & 20 \% & 130 \
2016 & 2.5 \% & 15 \% & 100 \
\hline
\end{array}$$
-Consider the data in Table 7.2. Using the "bathtub model" of unemployment, in 2016 the natural rate of unemployment is:

Accepted Answer

A)  14.3 percent 
B)  14.6 percent 
C)  0.2 percent 
D)  85.7 percent 
E)  16.7 percent 
A)  14.3 percent 
B)  14.6 percent 
C)  0.2 percent 
D)  85.7 percent 
E)  16.7 percent

Question 9

An increase in the income taxes on wages results in:

Accepted Answer

A)  the labor demand curve shifting left 
B)  the labor supply curve shifting left 
C)  the labor supply and demand curves shifting left 
D)  the labor demand curve shifting right 
E)  neither the labor supply nor demand curves shifting 
A)  the labor demand curve shifting left 
B)  the labor supply curve shifting left 
C)  the labor supply and demand curves shifting left 
D)  the labor demand curve shifting right 
E)  neither the labor supply nor demand curves shifting

Question 10

The supply of labor curve slopes upward because, with a higher wage, the opportunity cost of leisure rises.

Accepted Answer

A) True 
 B)False

Question 11

In the "bathtub model" of unemployment, the job finding rate equals the job separation rate.

Accepted Answer

A) True 
 B)False

Question 12

You win the lottery, which pays $1 million in 20 annual $50,000 payments. Your friends ask how much that would be if you received a single lump sum payment today. You do not have your calculator, but you show them the following equation to help them solve it themselves, assuming the interest rate is 10 percent:

Accepted Answer

A)  $\mathrm { PV } = \$ 50,000 \sum _ { T _ { - 0 } } ^ { 20 } [ 1 / ( 0.10 ) ] ^ { t }$ 
B)  $P V = \$ 50,000 \times \frac { 1 - [ 1 / ( 0.10 ) ] ^ { 20 } } { 1 - 1 / ( 0.10 ) }$ 
C)  $P V = ( 50,000 \times 20 ) / ( 0.10 )$ 
D)  $\mathrm { PV } = \$ 50,000 \sum _ { t = 0 } ^ { 20 } ( 0.10 ) ^ { t }$ 
E)  $\mathrm { PV } = \$ 1,000,000 / .1$ 
A)  $\mathrm { PV } = \$ 50,000 \sum _ { T _ { - 0 } } ^ { 20 } [ 1 / ( 0.10 ) ] ^ { t }$ 
B)  $P V = \$ 50,000 \times \frac { 1 - [ 1 / ( 0.10 ) ] ^ { 20 } } { 1 - 1 / ( 0.10 ) }$ 
C)  $P V = ( 50,000 \times 20 ) / ( 0.10 )$ 
D)  $\mathrm { PV } = \$ 50,000 \sum _ { t = 0 } ^ { 20 } ( 0.10 ) ^ { t }$ 
E)  $\mathrm { PV } = \$ 1,000,000 / .1$

Question 13

Refer to the following figure when answering  
Figure 7.4: Labor Market  
-Consider the labor market depicted in Figure 7.4. Wage, $\bar { w }$ , is called ________ and ________ unemployment.

Accepted Answer

A)  a wage ceiling; does nothing to 
B)  a wage rigidity; increases 
C)  the market wage; does nothing to 
D)  the market wage; increases 
E)  a wage rigidity; decreases 
A)  a wage ceiling; does nothing to 
B)  a wage rigidity; increases 
C)  the market wage; does nothing to 
D)  the market wage; increases 
E)  a wage rigidity; decreases

Question 14

The average unemployment benefit of an American worker is about $300 per week and lasts 26 weeks.

Accepted Answer

A) True 
 B)False

Question 15

When a firm purchases more capital, ceteris paribus, the demand for labor will fall.

Accepted Answer

A) True 
 B)False

Question 16

Wage rigidity:

Accepted Answer

A)  helps the labor market achieve equilibrium 
B)  prevents the capital market from realizing equilibrium 
C)  prevents the labor market from realizing equilibrium 
D)  prevents unemployment 
E)  None of these answers are correct. 
A)  helps the labor market achieve equilibrium 
B)  prevents the capital market from realizing equilibrium 
C)  prevents the labor market from realizing equilibrium 
D)  prevents unemployment 
E)  None of these answers are correct.

Question 17

Refer to the following figure when answering  
Figure 7.3: Labor Market  
-In the labor market depicted in Figure 7.3, an increase in the income tax would result in:

Accepted Answer

A)  a shift in labor supply from $L _ { 2 } ^ { S }$ to $L _ { 1 } ^ { S }$ 
B)  a shift in labor demand from $L _ { 2 } ^ { D }$ to $L _ { 1 } ^ { D }$ 
C)  a shift in labor demand from $L _ { 1 } ^ { D }$ to $L _ { 2 } ^ { D }$ 
D)  a shift in labor supply from $L _ { 1 } ^ { D }$ to $L _ { 2 } ^ { D }$ 
E)  None of these answers are correct. 
A)  a shift in labor supply from $L _ { 2 } ^ { S }$ to $L _ { 1 } ^ { S }$ 
B)  a shift in labor demand from $L _ { 2 } ^ { D }$ to $L _ { 1 } ^ { D }$ 
C)  a shift in labor demand from $L _ { 1 } ^ { D }$ to $L _ { 2 } ^ { D }$ 
D)  a shift in labor supply from $L _ { 1 } ^ { D }$ to $L _ { 2 } ^ { D }$ 
E)  None of these answers are correct.

Question 18

One explanation for the college wage premium is that demand for skill-based knowledge is rising.

Accepted Answer

A) True 
 B)False

Question 19

The labor demand curve slopes downward because:

Accepted Answer

A)  wages are inflexible 
B)  wages are higher when demand falls 
C)  of the diminishing marginal product of labor 
D)  of the income effect 
E)  None of these answers are correct. 
A)  wages are inflexible 
B)  wages are higher when demand falls 
C)  of the diminishing marginal product of labor 
D)  of the income effect 
E)  None of these answers are correct.

Question 20

Refer to the following figure when answering  
Figure 7.5: Labor Market  
-Consider Figure 7.5. Given what we know about the number of hours worked by college graduates and the wage premium received by college graduates, which equilibrium in the figure characterizes these empirical observations, on average?

Accepted Answer

A)  the intersection of $L _ { 1 } ^ { D }$ and $L _ { 1 } ^ { S }$ 
B)  the intersection of $L _ { 1 } ^ { D }$ and $L _ { 2 } ^ { S }$ 
C)  the intersection of $L _ { 2 } ^ { D }$ and $L _ { 2 } ^ { S }$ 
D)  the intersection of $L _ { 2 } ^ { D }$ and $L _ { 1 } ^ { S }$ 
E)  None of these answers are correct. 
A)  the intersection of $L _ { 1 } ^ { D }$ and $L _ { 1 } ^ { S }$ 
B)  the intersection of $L _ { 1 } ^ { D }$ and $L _ { 2 } ^ { S }$ 
C)  the intersection of $L _ { 2 } ^ { D }$ and $L _ { 2 } ^ { S }$ 
D)  the intersection of $L _ { 2 } ^ { D }$ and $L _ { 1 } ^ { S }$ 
E)  None of these answers are correct.

Refer to the following figure when answering Figure 7.3: Labor Market -In the labor market depicted in Figure 7.3, investment in new physical capital:

Refer to the following table when answering Table 7.2 Separation rate Finding rate Labor force 2015 2\% 20\% 130 2016 2.5\% 15\% 100 -Consider the data in Table 7.2. In the natural rate of unemployment was the higher of the two years at percent.

If the income taxes on wages increase, the labor supply curve will shift left, but what happens to the unemployment rate?

The natural rate of unemployment is decomposed into:

Unemployment is given by and the natural rate of unemployment is .

Since the end of World War II, the percentage of women in the workforce has been falling.

Cyclical unemployment is the unemployment that results from:

Refer to the following table when answering Table 7.2 Separation rate Finding rate Labor force 2015 2\% 20\% 130 2016 2.5\% 15\% 100 -Consider the data in Table 7.2. Using the "bathtub model" of unemployment, in 2016 the natural rate of unemployment is:

An increase in the income taxes on wages results in:

The supply of labor curve slopes upward because, with a higher wage, the opportunity cost of leisure rises.

In the "bathtub model" of unemployment, the job finding rate equals the job separation rate.

The average unemployment benefit of an American worker is about $300 per week and lasts 26 weeks.

When a firm purchases more capital, ceteris paribus, the demand for labor will fall.

Wage rigidity:

Refer to the following figure when answering Figure 7.3: Labor Market -In the labor market depicted in Figure 7.3, an increase in the income tax would result in:

One explanation for the college wage premium is that demand for skill-based knowledge is rising.

The labor demand curve slopes downward because:

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long-Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Dsge Models: the Frontier of Business Cycle Research

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Exam 7: The Labor Market, Wages, and Unemployment

Refer to the following figure when answering Figure 7.3: Labor Market -In the labor market depicted in Figure 7.3, investment in new physical capital:

Refer to the following table when answering Table 7.2 Separation rate Finding rate Labor force 2015 2\% 20\% 130 2016 2.5\% 15\% 100 -Consider the data in Table 7.2. In ________ the natural rate of unemployment was the higher of the two years at ________ percent.

If the income taxes on wages increase, the labor supply curve will shift left, but what happens to the unemployment rate?

The natural rate of unemployment is decomposed into:

Unemployment is given by ________ and the natural rate of unemployment is ________.

Since the end of World War II, the percentage of women in the workforce has been falling.

Cyclical unemployment is the unemployment that results from:

Refer to the following table when answering Table 7.2 Separation rate Finding rate Labor force 2015 2\% 20\% 130 2016 2.5\% 15\% 100 -Consider the data in Table 7.2. Using the "bathtub model" of unemployment, in 2016 the natural rate of unemployment is:

An increase in the income taxes on wages results in:

The supply of labor curve slopes upward because, with a higher wage, the opportunity cost of leisure rises.

In the "bathtub model" of unemployment, the job finding rate equals the job separation rate.

Refer to the following figure when answering Figure 7.4: Labor Market -Consider the labor market depicted in Figure 7.4. Wage, wˉ\bar { w }wˉ , is called ________ and ________ unemployment.

The average unemployment benefit of an American worker is about $300 per week and lasts 26 weeks.

When a firm purchases more capital, ceteris paribus, the demand for labor will fall.

Wage rigidity:

Refer to the following figure when answering Figure 7.3: Labor Market -In the labor market depicted in Figure 7.3, an increase in the income tax would result in:

One explanation for the college wage premium is that demand for skill-based knowledge is rising.

The labor demand curve slopes downward because:

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long-Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

Inflation

An Introduction to the Short Run

The Great Recession: a First Look

The Is Curve

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Dsge Models: the Frontier of Business Cycle Research

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Refer to the following table when answering Table 7.2 Separation rate Finding rate Labor force 2015 2\% 20\% 130 2016 2.5\% 15\% 100 -Consider the data in Table 7.2. In the natural rate of unemployment was the higher of the two years at percent.

Unemployment is given by and the natural rate of unemployment is .