Deck 10: Capital Utilization and Unemployment

Question 1

When the capital utilization rate, , increases then:

A)GDP decreases.
B)machines are in use fewer hours per period.
C)(hours per period)•(number of machines) increases.
D)all of the above.

Answer 1

(hours per period)•(number of machines) increases.

Question 2

An increase in unemployment insurance payments decreases effective real income while unemployed.

Answer 2

False

Question 3

The model predicts the capital utilization rate, , is:

A)acyclical.
B)procyclical.
C)countercyclical.
D)exogenous.

Answer 3

procyclical.

Question 4

The duration of unemployment is the number unemployed divided by the labour force.

Question 5

When we allow a capital utilization rate, , less than 100%, then the rate of return from owning capital becomes:

A)(R/P) - .
B)(R/P)• - ( ).
C)(R/P)• - .
D)(R/P) - ( ).

Question 6

The capital utilization rate is:

A)the rate capital wears out in a particular period.
B)the depreciation rate.
C)the percentage of capital used in production.
D)all of the above.

Question 7

GDP rises can rise in an expansion due to:

A)an increase in technology, A, directly increasing GDP.
B)an increase in technology, A, causing an increase in labour, L and GDP.
C)an increase in technology, A, causing an increase in the capital utilization rate, the quantity of capital services and GDP.
D)all of the above.

Question 8

When the capital utilization rate, , increases then:

A)GDP decreases.
B)machines are in use more hours per period.
C)(hours per period)•(number of machines) decreases.
D)all of the above.

Question 9

The model predicts that with a negative shock to technology, the capital utilization rate, , will:

A)rise as GDP rises.
B)fall as GDP falls.
C)rise as GDP falls.
D)fall as GDP rises.

Question 10

Unemployment will exist in a market clearing model, if it takes some search time for workers to find jobs.

Question 11

The optimal capital utilization rate, , is that where:

A)(R/P)• - ( ) is maximized.
B)(R/P)• = ( )
C)(R/P)• > ( )
D)(R/P)• < ( )

Question 12

Higher capital utilization rates may raise user costs of capital because higher utilization rates may imply:

A)operating at inconvenient times.
B)off-peak utility prices.
C)less highway congestion.
D)all of the above.

Question 13

When the capital utilization rate, , increases then:

A)GDP increases.
B)machines are in use more hours per period.
C)(hours per period)•(number of machines) increases.
D)all of the above.

Question 14

An owner of capital might set their capital utilization rate below 100% because:

A)the depreciation rate goes up with the capital utilization rate.
B)machines wear out faster when used more intensively.
C)to make time available for maintaining their capital.
D)all of the above.

Question 15

When the capital utilization rate, , is added to the model the interest rate becomes countercyclical.

Question 16

Higher capital utilization rates may raise user costs of capital because higher utilization rates may imply:

A)less highway congestion.
B)paying overtime to employees operating the machines.
C)off peak utility prices.
D)all of the above.

Question 17

Higher capital utilization rates may raise user costs of capital because higher utilization rates may imply:

A)less highway congestion.
B)off peak utility prices.
C)operating when complementary services like transportation are unavailable or more expensive.
D)all of the above.

Question 18

When the capital utilization rate, , increases then:

A)GDP increases.
B)machines are in use fewer hours per period.
C)(hour per period)•(number of machines) decreases.
D)all of the above.

Question 19

the net real income from supplying capital services is:

A)(R/P)• K - ( )K.
B)(R/P)• K + ( ).
C) ( )K - (R/P)•
D)(R/P)• K • ( )K

Question 20

Higher capital utilization rates may raise the user costs of capital because higher utilization rates may imply:

A)operating at inconvenient times.
B)paying overtime to employees operating the machines.
C)operating when complementary services like transporters are unavailable or more expensive.
D)all of the above.

Question 21

The Eurozone data from 1999.1 to 2013.4 shows the capital utilization rate, , is:

A)procyclical as the model predicts.
B)countercyclical as the model predicts.
C)procyclical the opposite the model predicts.
D)countercyclical the opposite as the model predicts.

Question 22

Unemployment can exist in a market clearing model, if:

A)all workers are identical.
B)it takes some search time for workers to find jobs.
C)the labour supply curve is upward sloping.
D)all of the above.

Question 23

Unemployment can exist in a market clearing model, if:

A)there are frictions in the labour market.
B)it takes some search time for workers to find jobs.
C)we allow for differences among workers and jobs.
D)all of the above.

Question 24

An increase in a worker's effective real income while unemployed, , will cause the worker's:

A)real wage offers to increase.
B)real wage offers to decrease.
C)real reservation wage to increase.
D)real reservation wage to decrease.

Question 25

A decrease in workers' effective real incomes while unemployed, , will:

A)lower the job finding rate and raise the expected duration of unemployment.
B)lower the job finding rate and the expected duration of unemployment.
C)raise the job finding rate and lower the expected duration of unemployment.
D)raise the job finding rate and the expected duration of unemployment.

Question 26

A worker will accept a job offer, if the real wage offer is above:

A)the worker's effective real income when unemployed, .
B)the wage the worker earned in their last job.
C)the worker's reservation wage.
D)the average wage in the economy.

Question 27

If the labour force is 100 million, there are 94 million people employed, there are 99 million jobs that employers want occupied, then the vacancy rate is:

A)5%.
B)5.1%
C)5.3%
D)1%

Question 28

We expect that an increase in the effective real income while unemployed ,

A)will reduce the job-finding rate.
B)will increase the job-finding rate.
C)increase real wage offers.
D)decrease real wage offers.

Question 29

If the rental price of capital increases, then the capital utilization rate, ,:

A)also increases.
B)decreases.
C)remains the same.
D)depends on whether the substitution rate is greater than the income effect.

Question 30

If the labour force is 100 million, there are 95 million people employed, there are 98 million jobs that employers want occupied, then the number of unemployed workers in the labour force is:

A)5 million.
B)3 million.
C)2 million.
D)none of the above.

Question 31

Unemployment can exist in a market clearing model, if:

A)the labour market is in disequilibrium.
B)we allow capital utilization of less than 100%.
C)we allow for differences among workers and jobs.
D)all of the above.

Question 32

The model predicts that with a positive shock to technology the capital utilization rate, , will

A)fall as GDP falls.
B)fall as GDP rises.
C)rise as GDP rises.
D)rise as GDP falls.

Question 33

If the labour force is 100 million, there are 95 million people employed, there are 98 million jobs that employers want occupied, then the number of vacancies is:

A)5 million.
B)3 million.
C)2 million.
D)none of the above.

Question 34

The vacancy rate in the labour market is:

A)the number of job openings divided by the number of unemployed people in the labour force.
B)the number of job openings divided by the number of workers in the labour force.
C)the ratio of open jobs to filled jobs.
D)the ratio of open jobs to the total number of jobs that employers want occupied.

Question 35

Unemployment can exist in a market clearing model, if:

A)there are frictions in the labour market.
B)the labour supply curve is upward sloping.
C)the labour market is in equilibrium.
D)all of the above.

Question 36

One minus the unemployment rate, 1 - u, is:

A)the vacancy rate.
B)the labour force.
C)the employment rate.
D)the level of employment.

Question 37

If the labour force is 100 million, there are 95 million people employed, there are 98 million jobs that employers want occupied, then the unemployment rate is:

A)3%.
B)5%.
C)5.3%.
D)none of the above.

Question 38

After the capital utilization rate, , is included in the model, the interest rate:

A)is still procyclical.
B)is still countercyclical.
C)becomes procyclical.
D)becomes countercyclical.

Question 39

The unemployment rate is:

A)the number of workers in the labour force unemployed divided by the number of workers employed.
B)the number of workers employed divide by the number of workers in the labour force unemployed.
C)the number of workers in the labour force unemployed divided by the labour force.
D)the labour force divided by the number of workers in the labour force unemployed.

Question 40

If the labour force is 100 million, there are 95 million people employed, there are 98 million jobs that employers want occupied, vacancy rate is:

A)5%.
B)3.2%.
C)3.1%.
D)3%.

Question 41

In the model of this chapter, the natural rate of unemployment is the unemployment rate:

A)where job findings equal job separations.
B)job findings are maximized.
C)the job separation rate equals the job finding rate.
D)job separations are minimized.

Question 42

Job separations can be due to:

A)a positive shock to the firm's production function.
B)an increase in technology.
C)a change in a worker's circumstances such as changing locations.
D)all of the above.

Question 43

How can there be unemployment in a market clearing model?

Question 44

The Eurozone data from 2010 to 2015 shows that the job finding rate is:

A)acyclical.
B)countercyclical.
C)procyclical.
D)exogenous.

Question 45

Job separations can be due to:

A)an adverse shock to the firm's production function.
B)the job being temporary from the start like a seasonal job.
C)a change in a worker's circumstances such as changing locations.
D)all of the above.

Question 46

The job-finding rate is:

A)the number of hires per month divided by the number unemployed.
B)the number of hires per month divided by the number employed.
C)the number of hires per month divided by the unemployment rate.
D)the number of hires per month divided by the employment rate.

Question 47

In the model, the natural rate of unemployment is:

A)negatively related to that job separations rate.
B)zero.
C)fixed.
D)negatively related to the job finding rate.

Question 48

Job separations can be caused by:

A)an adverse shock to the firm's production function.
B)foreign competition.
C)increased technology, A.
D)all of the above.

Question 49

The Eurozone data from 2010 to 2015 shows that the job separation rate is:

A)acyclical.
B)countercyclical.
C)procyclical.
D)exogenous.

Question 50

How does this chapter model define the natural rate of unemployment and what does the natural rate of unemployment depend on.

Question 51

In the model, the natural rate of unemployment is:

A)positively related to that job separations rate.
B)zero.
C)fixed.
D)positively related to the job finding rate.

Question 52

If the job separation rate is 0.03 and the job finding rate is 0.7, then the natural rate of unemployment is:

A)4.2%
B)4.1%
C)23.3%
D)none of the above.

Question 53

In Eurozone data vacancies from 2009 to 2015 as measure by the help-wanted index are:

A)procyclical as the model predicts.
B)countercyclical as the model predicts.
C)procyclical the opposite the model predicts.
D)countercyclical the opposite the model predicts.

Question 54

A negative shock to productivity, A, will:

A)lower the job finding rate and raise the expected duration of unemployment.
B)lower the job finding rate and the expected duration of unemployment.
C)raise the job finding rate and lower the expected duration of unemployment.
D)raise the job finding rate and the expected duration of unemployment.

Question 55

What is the reservation wage?

Question 56

How does the capital utilization rate affect the depreciation rate and why?

Question 57

If the job separation rate is 0.02 and the job finding rate is 0.3, then the natural rate of unemployment is:

A)6.25%
B)15%
C)6.67%
D)none of the above.

Question 58

How does the capital utilization enter the production function?

Question 59

Discouraged workers are:

A)those that are unemployed.
B)those that are underemployed.
C)those who have dropped out of the labour force.
D)those who are under paid.