Exam 14: The Labor Market in the Macroeconomy

Explain what happens to the change in the inflation rate when the unemployment rate in the economy is to the left of the NAIRU. What happens when it is to the right?

Explain what role expectations play in determining the Phillips curve.

If the economy experiences both inflation and unemployment when aggregate supply decreased, then what must have happened to aggregate demand?

Explain how incomplete or imperfect market information may contribute to unemployment.

Why do some economists argue that the NAIRU is actually misnamed?

According to the Classical view, what are the factors that are used by the household in determining how much labor to supply? Why might some members of the household decide not to be part of the labor force?

According to Classical economists, how will the economy respond to an increase in the demand for output?

-If input price changes lag behind output price changes in both the long run and the short run what will be the shape of both the short-run and long-run Phillips curve? What consequence does this have for policy making?

For each of the following indicate if there would be a positive relationship, a negative relationship, or no systematic relationship between the unemployment and inflation rates.

Explain what role import prices play in determining the Phillips curve.

What are social contracts?