Question 1

Suppose the wage rate in the labor market is $15 and the demand for labor decreases.If wages are sticky,

Accepted Answer

A) unemployment decreases. 
B) unemployment increases. 
C) unemployment stays the same. 
D) wages decrease to eliminate the surplus. 
A) unemployment decreases. 
B) unemployment increases. 
C) unemployment stays the same. 
D) wages decrease to eliminate the surplus.

Question 2

Refer to the information provided in Figure 14.7 below to answer the questions that follow.   Figure 14.7
-Refer to Figure 14.7.Suppose the economy is at Point A,an increase in money supply will move the economy to Point ________ in the short run.

Accepted Answer

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

Question 3

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 4

Refer to the information provided in Figure 14.7 below to answer the questions that follow.   Figure 14.7
-Refer to Figure 14.7.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 5

According to the classical economists,those who are not working

Accepted Answer

A) have chosen not to work at the market wage. 
B) are too productive to be hired at the current wage. 
C) are unable to find a job at the current wage rate. 
D) have given up looking for a job,but would accept a job at the current wage if one were offered to them. 
A) have chosen not to work at the market wage. 
B) are too productive to be hired at the current wage. 
C) are unable to find a job at the current wage rate. 
D) have given up looking for a job,but would accept a job at the current wage if one were offered to them.

Question 6

Even though explicit contracts may lead to layoffs during recessions,explicit contracts may still be efficient because such contracts

Accepted Answer

A) guarantee that only the least-productive workers will be laid off. 
B) reduce unemployment effects. 
C) reduce negotiation costs. 
D) will equitably spread the layoffs among junior and senior workers. 
A) guarantee that only the least-productive workers will be laid off. 
B) reduce unemployment effects. 
C) reduce negotiation costs. 
D) will equitably spread the layoffs among junior and senior workers.

Question 7

Refer to the information provided in Figure 14.2 below to answer the questions that follow.   Figure 14.2
-Refer to Figure 14.2.The equilibrium wage rate is $________ and the equilibrium number of people employed is ________ million people.

Accepted Answer

A) 15;270 
B) 9;210 
C) 15;150 
D) 6;180 
A) 15;270 
B) 9;210 
C) 15;150 
D) 6;180

Question 8

Classical economists believe that the aggregate supply curve is vertical because

Accepted Answer

A) wages are flexible and they always change to clear the labor market. 
B) the labor market is always in equilibrium. 
C) people who are not working are those who have chosen not to work at the prevailing wage rate. 
D) all of the above 
A) wages are flexible and they always change to clear the labor market. 
B) the labor market is always in equilibrium. 
C) people who are not working are those who have chosen not to work at the prevailing wage rate. 
D) all of the above

Question 9

Refer to the information provided in Figure 14.7 below to answer the questions that follow.   Figure 14.7
-Refer to Figure 14.7.The unemployment rate at U1

Accepted Answer

A) is greater than the natural rate. 
B) is lower than the natural rate. 
C) equals the natural rate. 
D) equals zero. 
A) is greater than the natural rate. 
B) is lower than the natural rate. 
C) equals the natural rate. 
D) equals zero.

Question 10

Refer to the information provided in Figure 14.6 below to answer the questions that follow.   Figure 14.6
-Refer to Figure 14.6.Assuming all shocks to the economy arise from demand changes,which panel represents the short-run relationship between output and the price level?

Accepted Answer

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

Question 11

Which of the following is NOT a reason why firms pay efficiency wages?

Accepted Answer

A) to reduce turnovers 
B) to abide by minimum wage laws 
C) to improve morale 
D) to reduce shirking of work 
A) to reduce turnovers 
B) to abide by minimum wage laws 
C) to improve morale 
D) to reduce shirking of work

Question 12

Refer to the information provided in Figure 14.7 below to answer the questions that follow.   Figure 14.7
-Refer to Figure 14.7.Suppose the economy is initially at Point A.A contractionary fiscal policy moves the economy to Point ________ in the short run.

Accepted Answer

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

Question 13

At the natural rate of unemployment,frictional unemployment is zero.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Changes in the ________ market affect the shape of the short run aggregate supply curve.

Accepted Answer

A) money 
B) labor 
C) goods 
D) financial 
A) money 
B) labor 
C) goods 
D) financial

Question 16

The government lowers the marginal income tax rates so that after-tax wages are increased.This most likely will shift the labor

Accepted Answer

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

Question 17

Employment tends to rise 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 18

The social contract explanation for the existence of downwardly sticky wages focuses on

Accepted Answer

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

Question 19

Refer to the information provided in Figure 14.4 below to answer the questions that follow.   Figure 14.4
-Refer to Figure 14.4.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 20

Refer to the information provided in Figure 14.2 below to answer the questions that follow.   Figure 14.2
-Refer to Figure 14.2.At wage rate $6,there is a ________ of labor equal to ________ million people.

Accepted Answer

A) shortage;180 
B) shortage;60 
C) surplus;180 
D) surplus;60 
A) shortage;180 
B) shortage;60 
C) surplus;180 
D) surplus;60

Exam 14: The Labor Market in the Macroeconomy

Suppose the wage rate in the labor market is $15 and the demand for labor decreases.If wages are sticky,

Refer to the information provided in Figure 14.7 below to answer the questions that follow. Figure 14.7 -Refer to Figure 14.7.Suppose the economy is at Point A,an increase in money supply will move the economy to Point ________ in the short run.

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.

Refer to the information provided in Figure 14.7 below to answer the questions that follow. Figure 14.7 -Refer to Figure 14.7.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

According to the classical economists,those who are not working

Even though explicit contracts may lead to layoffs during recessions,explicit contracts may still be efficient because such contracts

Refer to the information provided in Figure 14.2 below to answer the questions that follow. Figure 14.2 -Refer to Figure 14.2.The equilibrium wage rate is $________ and the equilibrium number of people employed is ________ million people.

Classical economists believe that the aggregate supply curve is vertical because

Refer to the information provided in Figure 14.7 below to answer the questions that follow. Figure 14.7 -Refer to Figure 14.7.The unemployment rate at U1

Refer to the information provided in Figure 14.6 below to answer the questions that follow. Figure 14.6 -Refer to Figure 14.6.Assuming all shocks to the economy arise from demand changes,which panel represents the short-run relationship between output and the price level?

Which of the following is NOT a reason why firms pay efficiency wages?

Refer to the information provided in Figure 14.7 below to answer the questions that follow. Figure 14.7 -Refer to Figure 14.7.Suppose the economy is initially at Point A.A contractionary fiscal policy moves the economy to Point ________ in the short run.

At the natural rate of unemployment,frictional unemployment is zero.

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

Changes in the ________ market affect the shape of the short run aggregate supply curve.

The government lowers the marginal income tax rates so that after-tax wages are increased.This most likely will shift the labor

Employment tends to rise when

The social contract explanation for the existence of downwardly sticky wages focuses on

Refer to the information provided in Figure 14.4 below to answer the questions that follow. Figure 14.4 -Refer to Figure 14.4.A minimum wage of $12

Refer to the information provided in Figure 14.2 below to answer the questions that follow. Figure 14.2 -Refer to Figure 14.2.At wage rate $6,there is a ________ of labor equal to ________ million people.

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand,supply,and Market Equilibrium

Demand and Supply Applications

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

The Money Supply and the Federal Reserve System

Money Demand and the Equilibrium Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Costs 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 and Transitional Economies

Filters

Refer to the information provided in Figure 14.2 below to answer the questions that follow. Figure 14.2 -Refer to Figure 14.2.The equilibrium wage rate is $ and the equilibrium number of people employed is million people.

Refer to the information provided in Figure 14.2 below to answer the questions that follow. Figure 14.2 -Refer to Figure 14.2.At wage rate $6,there is a of labor equal to million people.