Question 1

If productivity increases as wages increase and firms pay a wage above the market clearing wage, then

Accepted Answer

A)  these firms will go out of business in the long run because they will not be able to compete with firms paying lower wages. 
B)  these firms will face an excess demand for labor and will be able to hire the best workers in the market. 
C)  these firms will have lower profit levels than their competitors. 
D)  a potential benefit these firms may receive is a reduction in employee turnover. 
A)  these firms will go out of business in the long run because they will not be able to compete with firms paying lower wages. 
B)  these firms will face an excess demand for labor and will be able to hire the best workers in the market. 
C)  these firms will have lower profit levels than their competitors. 
D)  a potential benefit these firms may receive is a reduction in employee turnover.

Question 2

Classical economists believe that when the aggregate supply curve is horizontal, monetary policy and fiscal policy will have no effect on real output.

Accepted Answer

A) True 
 B)False

Question 3

Refer to the information provided in Figure 13.1 below to answer the questions that follow.   Figure 13.1
-Refer to Figure 13.1. If the value people put on their leisure time increases, the equilibrium wage rate

Accepted Answer

A)  could change from $9 to $6. 
B)  could change from $9 to $15. 
C)  would stay at $15. 
D)  would increase to $15. 
A)  could change from $9 to $6. 
B)  could change from $9 to $15. 
C)  would stay at $15. 
D)  would increase to $15.

Question 4

Refer to the information provided in Figure 13.1 below to answer the questions that follow.   Figure 13.1
-Refer to Figure 13.1. If the productivity of workers decreases, the equilibrium wage rate

Accepted Answer

A)  could change from $9 to $6. 
B)  could change from $9 to $15. 
C)  would stay at $15. 
D)  would increase to $15. 
A)  could change from $9 to $6. 
B)  could change from $9 to $15. 
C)  would stay at $15. 
D)  would increase to $15.

Question 5

Cyclical unemployment is that which rises in recessions and shrinks during expansions.

Accepted Answer

A) True 
 B)False

Question 6

Related to the Economics in Practice on p. 251: According to the study cited in the Economics in Practice, call backs for job postings

Accepted Answer

A)  increased slightly as a response to unemployment duration. 
B)  increased significantly as a response to unemployment duration. 
C)  decreased dramatically as a response to unemployment duration. 
D)  was not significantly impacted by the duration of unemployment. 
A)  increased slightly as a response to unemployment duration. 
B)  increased significantly as a response to unemployment duration. 
C)  decreased dramatically as a response to unemployment duration. 
D)  was not significantly impacted by the duration of unemployment.

Question 7

The percentage of workers whose wages are set by explicit contracts increases. This should

Accepted Answer

A)  make it more difficult for the labor market to reach an equilibrium after a change in the demand for labor. 
B)  make it easier for the labor market to reach an equilibrium after a change in the demand for labor. 
C)  have no impact on the movement of the labor market toward equilibrium after a change in the demand for labor. 
D)  cause the labor market to always be at an equilibrium, even if there is a change in the demand for labor. 
A)  make it more difficult for the labor market to reach an equilibrium after a change in the demand for labor. 
B)  make it easier for the labor market to reach an equilibrium after a change in the demand for labor. 
C)  have no impact on the movement of the labor market toward equilibrium after a change in the demand for labor. 
D)  cause the labor market to always be at an equilibrium, even if there is a change in the demand for labor.

Question 8

Refer to the information provided in Figure 13.7 below to answer the questions that follow.   Figure 13.7
-Refer to Figure 13.7. Suppose the economy is at Point A, and the cost of inputs is fixed. An increase in government spending could move the economy to Point

Accepted Answer

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

Question 9

According to classical economists, excessive unemployment does not persist in the economy because

Accepted Answer

A)  wages will always adjust to ensure equilibrium in the labor market. 
B)  the labor demand does not change in the economy. 
C)  the labor supply does not change in the economy. 
D)  interest rates always change to insure equilibrium in the money market. 
A)  wages will always adjust to ensure equilibrium in the labor market. 
B)  the labor demand does not change in the economy. 
C)  the labor supply does not change in the economy. 
D)  interest rates always change to insure equilibrium in the money market.

Question 10

Suppose the wage rate in the labor market is $15 and the productivity of workers increases, which of the following statements is incorrect?

Accepted Answer

A)  The labor demand curve shifts to the right. 
B)  If wages are flexible, there will be an increase in wages. 
C)  If wages are sticky, there will be a shortage in the labor market. 
D)  If wages are sticky, there will be a surplus in the labor market. 
A)  The labor demand curve shifts to the right. 
B)  If wages are flexible, there will be an increase in wages. 
C)  If wages are sticky, there will be a shortage in the labor market. 
D)  If wages are sticky, there will be a surplus in the labor market.

Question 11

If the minimum wage is set above the market clearing wage, wages will be "sticky" in the downward direction.

Accepted Answer

A) True 
 B)False

Question 12

If the wage rate in the labor market is $12 and more previously unemployed people exited the labor force, which of the following statements is correct?

Accepted Answer

A)  If wages are flexible, then wages will decrease. 
B)  If wages are sticky, the unemployment rate decreases. 
C)  If wages are sticky, the unemployment rate stays the same. 
D)  If wages are flexible, the unemployment rate increases. 
A)  If wages are flexible, then wages will decrease. 
B)  If wages are sticky, the unemployment rate decreases. 
C)  If wages are sticky, the unemployment rate stays the same. 
D)  If wages are flexible, the unemployment rate increases.

Question 13

Refer to the information provided in Figure 13.7 below to answer the questions that follow.   Figure 13.7
-Refer to Figure 13.7. Suppose the economy is initially at Point A. An expansionary 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 14

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 15

Suppose that due to a shortage of parts from its Asian suppliers, Apple experienced a 25% drop in its sales. Even though its sales decreased, Apple did not cut the wages of its non-unionized workers. This is an example of

Accepted Answer

A)  an implicit or social contract not to cut wages. 
B)  employment-at-will. 
C)  poor management. 
D)  an explicit contract not to cut wages. 
A)  an implicit or social contract not to cut wages. 
B)  employment-at-will. 
C)  poor management. 
D)  an explicit contract not to cut wages.

Question 16

An increase in the productivity of workers shifts the labor ________ curve to the ________.

Accepted Answer

A)  supply; left 
B)  supply; right 
C)  demand; right 
D)  demand; left 
A)  supply; left 
B)  supply; right 
C)  demand; right 
D)  demand; left

Question 17

If the economy is at potential output, expected inflation

Accepted Answer

A)  is greater than actual inflation. 
B)  equals actual inflation. 
C)  is less than actual inflation. 
D)  equals the natural rate of unemployment. 
A)  is greater than actual inflation. 
B)  equals actual inflation. 
C)  is less than actual inflation. 
D)  equals the natural rate of unemployment.

Question 18

A decrease in the productivity of workers shifts the labor ________ curve to the ________.

Accepted Answer

A)  supply; left 
B)  supply; right 
C)  demand; right 
D)  demand; left 
A)  supply; left 
B)  supply; right 
C)  demand; right 
D)  demand; left

Question 19

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 20

A definition of unemployment that ________ economists would use is "Anyone who is willing to work at the current market wage, but has not yet been able to find employment."

Accepted Answer

A)  Marxist 
B)  Keynesian 
C)  classical 
D)  monetarist 
A)  Marxist 
B)  Keynesian 
C)  classical 
D)  monetarist

Exam 13: The Labor Market in the Macroeconomy

If productivity increases as wages increase and firms pay a wage above the market clearing wage, then

Classical economists believe that when the aggregate supply curve is horizontal, monetary policy and fiscal policy will have no effect on real output.

Refer to the information provided in Figure 13.1 below to answer the questions that follow. Figure 13.1 -Refer to Figure 13.1. If the value people put on their leisure time increases, the equilibrium wage rate

Refer to the information provided in Figure 13.1 below to answer the questions that follow. Figure 13.1 -Refer to Figure 13.1. If the productivity of workers decreases, the equilibrium wage rate

Cyclical unemployment is that which rises in recessions and shrinks during expansions.

Related to the Economics in Practice on p. 251: According to the study cited in the Economics in Practice, call backs for job postings

The percentage of workers whose wages are set by explicit contracts increases. This should

Refer to the information provided in Figure 13.7 below to answer the questions that follow. Figure 13.7 -Refer to Figure 13.7. Suppose the economy is at Point A, and the cost of inputs is fixed. An increase in government spending could move the economy to Point

According to classical economists, excessive unemployment does not persist in the economy because

Suppose the wage rate in the labor market is $15 and the productivity of workers increases, which of the following statements is incorrect?

If the minimum wage is set above the market clearing wage, wages will be "sticky" in the downward direction.

If the wage rate in the labor market is $12 and more previously unemployed people exited the labor force, which of the following statements is correct?

Refer to the information provided in Figure 13.7 below to answer the questions that follow. Figure 13.7 -Refer to Figure 13.7. Suppose the economy is initially at Point A. An expansionary fiscal policy moves the economy to Point ________ in the short run.

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

Suppose that due to a shortage of parts from its Asian suppliers, Apple experienced a 25% drop in its sales. Even though its sales decreased, Apple did not cut the wages of its non-unionized workers. This is an example of

An increase in the productivity of workers shifts the labor ________ curve to the ________.

If the economy is at potential output, expected inflation

A decrease in the productivity of workers shifts the labor ________ curve to the ________.

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

A definition of unemployment that ________ economists would use is "Anyone who is willing to work at the current market wage, but has not yet been able to find employment."

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

Money, the Federal Reserve, and the Interest Rate

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

Policy Effects and Cost 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 Economies

Critical Thinking About Research

Filters

An increase in the productivity of workers shifts the labor curve to the .

A decrease in the productivity of workers shifts the labor curve to the .