Deck 13: Technological Progress: the Short,the Medium,and the Long Run

Question 1

When the production function is represented by Y = NA,labor productivity is represented by which of the following expressions?

A)1 / A
B)NA
C)A / Y
D)Y / A
E)none of the above

Answer 1

E

Question 2

When the unemployment rate is on the horizontal axis and the real wage is on the vertical axis,an increase in productivity will cause which of the following to occur?

A)the wage-setting and price-setting curves will both shift downward.
B)the wage-setting and price-setting curves will both shift upward.
C)the price-setting curve to shift downward,and no shift in the wage-setting curve.
D)the wage-setting curve to shift upward,and the price-setting curve to shift downward.
E)the wage-setting curve to shift downward,and the price-setting curve to shift upward.

Answer 2

B

Question 3

Employment will decrease as a result of an increase in productivity when which of the following occurs?

A)the AS curve shifts downward
B)output growth is less than productivity growth
C)productivity growth is less than output growth
D)the AD curve shifts to the right
E)none of the above

Answer 3

B

Question 4

Suppose an economy experiences an increase in productivity.The AD curve will most likely shift to the left when this increase in productivity is the result of which of the following?

A)a major technological breakthrough
B)a reorganization of production designed to reduce costs with existing technology
C)an increase in human capital
D)government subsidies for higher education
E)none of the above

Question 5

Which of the following statements about the United States during the twentieth century is correct?

A)output growth has been approximately equal to employment growth
B)output growth has been slower than employment growth
C)output growth has been faster than employment growth
D)output has increased largely due to monetary and fiscal policy
E)output has decreased largely due to monetary and fiscal policy

Question 6

Based on our understanding of the wage setting equation,which of the following will NOT cause a reduction in the nominal wage?

A)an increase in unemployment
B)a reduction in the expected price level
C)a reduction in expected productivity
D)all of the above
E)none of the above

Question 7

An increase in productivity will cause which of the following according to the price-setting behavior of firms?

A)a reduction in prices set by firms
B)an increase in the real wage paid by firms
C)a reduction in the markup set by firms
D)all of the above
E)none of the above

Question 8

Suppose workers' and firms' expectations of the price level and productivity are accurate.In this case,an increase in productivity will cause which of the following?

A)an increase in both the real wage and the natural rate of unemployment
B)a decrease in both the real wage and the natural rate of unemployment
C)an increase in the real wage and no change in the natural rate of unemployment
D)a decrease in the real wage and an increase in the natural rate of unemployment
E)none of the above

Question 9

Some believe that technological progress leads to higher unemployment in the medium run.This claim that technological progress results in an increase in unemployment in the medium is supported by

A)economic theory,but contradicted by the evidence.
B)theory and evidence.
C)the evidence,but contradicted by theory.
D)neither theory nor evidence
E)none of the above

Question 10

An increase in productivity will likely cause

A)the AS curve to shift upward,but has no effect on the AD curve.
B)the AS curve to shift downward,and the AD curve to shift leftward.
C)the AS curve to shift upward and the AD curve to shift rightward.
D)the AS curve to shift downward and the AD curve to shift rightward.
E)the AS curve to shift downward,and have an ambiguous effect on the AD curve.

Question 11

Technological unemployment is a macroeconomic phenomenon that occurs when

A)unemployment changes due to the effects of technology in high-technology industries.
B)unemployment changes due to the effects of monetary and fiscal policy in the New Economy.
C)hysterisis.
D)Eurosclerosis.
E)unemployment changes as a result of technological change.

Question 12

Based on price setting behavior,which of the following will cause an increase in the price level?

A)a reduction in productivity
B)an increase in the nominal wage
C)an increase in the markup
D)all of the above
E)none of the above

Question 13

The number of workers employed will not change as a result of an increase in productivity when which of the following occurs?

A)the AS curve shifts downward
B)output growth exceeds productivity growth.
C)productivity growth is equal to output growth.
D)the AD curve shifts to the right.
E)none of the above

Question 14

Suppose an economy experiences an increase in technological progress.This increase in technological progress will

A)allow more output to be produced with the same number of workers.
B)allow the same amount of output to be produced with fewer workers.
C)lead to changes in the types of goods produced.
D)all of the above
E)none of the above

Question 15

"Churning" refers to

A)changes in the real wage over the business cycle.
B)changes in the markup over the business cycle.
C)structural change associated with technological progress.
D)the increase in productivity caused by an increase in output.
E)the increase in output caused by an increase in productivity.

Question 16

The empirical evidence suggests that periods of high productivity growth will cause which of the following in the short run?

A)higher markups
B)lower unemployment
C)constant real wages
D)greater equality in wages
E)none of the above

Question 17

The evidence suggests that recent technological change

A)permanently increased the natural rate of unemployment.
B)is different from past technological change,in that it has no impact on productivity.
C)has increased productivity in the service sector only.
D)has increased productivity in the manufacturing sector only.
E)has increased the wage gap between skilled and unskilled workers.

Question 18

For this question,assume that firms' of productivity are accurate while workers' expectations of productivity adjust slowly over time.In this case,an increase in productivity will cause which of the following?

A)an increase in both the real wage and the natural rate of unemployment
B)a decrease in both the real wage and the natural rate of unemployment
C)an increase in the real wage and a reduction in the natural rate of unemployment
D)a decrease in the real wage and an increase in the natural rate of unemployment
E)none of the above

Question 19

For this question,assume productivity has been increasing by 5% per year.Also assume that workers' expectations of productivity growth adjust slowly over time.For this economy,a reduction in productivity growth from 5% to 2% will most likely cause which of the following to occur?

A)an increase in the natural rate of unemployment
B)a reduction in the real wage
C)an increase in the markup over labor costs
D)all of the above
E)none of the above

Question 20

A major explanation for the decline in employment projected in textiles is

A)increases in income.
B)social problems in the U.S.
C)shifts in production toward low-wage countries.
D)inaccurate expectations about productivity growth.
E)inaccurate expectations about the price level.

Question 21

In recent years,real wages of the least educated workers

A)have increased faster than the real wages of college-educated workers.
B)have increased,but by less than the real wages of college-educated workers.
C)have decreased,but by less than the real wages of college-educated workers.
D)have decreased,while the real wages of college-educated workers have increased.
E)have decreased at about the same rate as the real wages of college-educated workers.

Question 22

Suppose the aggregate production function is represented by Y = AN.Which of the following expressions represents the number of additional workers required to increase production by one unit?

A)1 / A
B)Y / N
C)1 / N
D)1 / Y
E)none of the above

Question 23

For this question,assume that workers expectations of the price level and productivity are accurate.Now suppose that the economy experiences an increase in productivity.Which of the following will occur in the medium run?

A)no change in unemployment
B)an increase in unemployment
C)a reduction in unemployment
D)no change in the natural level of output if the unemployment rate does not change
E)none of the above

Question 24

Suppose the aggregate production function is represented by the following: Y = AN.Given this information,labor productivity is given by

A)Y.
B)N / A.
C)A / N.
D)A.
E)none of the above

Question 25

Since 1971,the annual growth rate of real wages has been

A)remarkably high.
B)positive,but low.
C)zero.
D)negative.
E)impossible to measure accurately,and so has not been reported.

Question 26

Because of labor hoarding,a reduction in output may signal

A)an increase in employment.
B)a reduction in employment.
C)no change in employment.
D)a reduction in productivity.

Question 27

Which of the following is NOT true about technological progress?

A)allow for the production of a larger quantity of goods using the same number of workers
B)lead to the production of new goods
C)lead to the disappearance of old goods
D)cause a reduction in employment in the short run
E)none of the above

Question 28

For this question,assume that the aggregate production function is represented by Y = A.Which of the following represents the marginal cost of producing an additional unit of output?

A)W
B)W / A
C)A / W
D) (1+A)W
E)1 / W

Question 29

For this question,assume that expectations of P and A are correct.Based on price setting behavior,the real wage will be equal to which of the following?

A)A / (1+m)
B)AP / (1+m)
C)APF(u,z)
D)P(1 + m)
E)none of the above

Question 30

Which of the following represents the wage setting relation when changes in labor productivity are allowed to occur?

A)W = PeF(u,z)
B)W = P(1 + m)
C)W = PeF(u,z) / A
D)W = AP / (1+m)
E)none of the above

Question 31

Which of the following would increase the gap in wages between skilled and unskilled workers?

A)less technological progress of the kind we've experienced in the past 15 years
B)new types of production technology that require workers to have more skills
C)an increase in the costs of going to college
D)all of the above
E)none of the above

Question 32

Which of the following is NOT believed to cause recent increases in wage inequality?

A)international trade
B)contractionary monetary policy
C)skill-biased technological progress
D)all of the above
E)none of the above

Question 33

Assume an economy experiences,for a given period,a 4% increase in output and a 4% increase in productivity.Given this information,we know that which of the following occurred for this economy during this period?

A)the unemployment rate increased during this period.
B)the unemployment rate decreased during this period.
C)the unemployment rate did not change during this period.
D)the effects on the unemployment rate are ambiguous.
E)none of the above

Question 34

Assume an economy experiences,for a given period,a 1% increase in output and a 5% increase in productivity.Given this information,we know that which of the following occurred for this economy during this period?

A)the unemployment rate increased during this period.
B)the unemployment rate decreased during this period.
C)the unemployment rate did not change during this period.
D)the effects on the unemployment rate are ambiguous.
E)none of the above

Question 35

Assume an economy experiences,for a given period,a 4% increase in output and a 2% increase in productivity.Given this information,we know that which of the following occurred for this economy during this period?

A)the unemployment rate increased during this period.
B)the unemployment rate decreased during this period.
C)the unemployment rate did not change during this period.
D)the effects on the unemployment rate are ambiguous.
E)none of the above

Question 36

For this question,assume that the aggregate production function is represented by Y = AN.Which of the following represents the price setting relation for this economy?

A) (1 + m)A
B) (1 + m)A / W
C) (1 + m)W
D)W / A
E)none of the above

Question 37

Assume an economy experiences an increase in productivity that occurs as a result of a more widespread implementation of a major technological breakthrough.Given this information,we would expect which of the following to occur?

A)aggregate demand would not change
B)aggregate demand would shift to the right
C)aggregate demand would shift to the left
D)both the aggregate demand and aggregate supply curves would shift to the left

Question 38

Assume an economy experiences an increase in productivity that occurs as a result of the more efficient use of existing technologies.Given this information,we would expect which of the following to occur?

A)aggregate demand would not change
B)aggregate demand would shift to the right
C)aggregate demand would shift to the left
D)both the aggregate demand and aggregate supply curves would shift to the left

Question 39

Because of labor hoarding,an increase in output may signal

A)an increase in employment.
B)a reduction in employment.
C)no change in employment.
D)a reduction in productivity.

Question 40

In recent years,the increasing relative wage of skilled labor has been mostly due to

A)a decrease in the supply of skilled labor that exceeds the decrease in demand.
B)an increase in the demand for skilled labor that exceeds the increase in supply.
C)a decrease in the supply of,and increase in the demand for,skilled labor.
D)government laws promoting the hiring of skilled labor.
E)government subsidies provided to college students.

Question 41

For this question,assume that expectations of P and A are correct.Now suppose that there is a 4% increase in A.Given this information,which of the following will occur?

A)the PS relation will shift up by 4%.
B)the WS relation will shift up by less than 4%.
C)the WS relation will shift down by 4%.
D)the PS relation will shift down by 4%.

Question 42

For this question,assume that expectations of productivity are slow to adjust.Further assume that A had been increasing by 6% a year.Now suppose that A only increases by 2% in period t.This slowdown in productivity growth will cause

A)the PS relation to shift up more than the WS relation.
B)the WS relation to shift up more than the PS relation.
C)the natural rate of unemployment to fall.
D)the real wage to fall.

Question 43

Explain what effect a reduction in productivity has on wage setting behavior,price setting behavior,the equilibrium real wage,the natural rate of unemployment,and the natural level of output.

Question 44

When was the last year that GDP per capita in North Korea was approximately equal to GDP per capita in South Korea?

A)1950
B)1970
C)1990
D)2000
E)none of the above

Question 45

There are some concerns that technological progress can lead to an increase in unemployment.Explain the two related but separate dimensions of technological progress.

Question 46

Joseph Schumpeter argued that growth was a process of creative destruction.Explain what is meant by the phrase,"creative destruction."

Question 47

For this question,assume that expectations of productivity are slow to adjust.An increase in productivity growth from 1% to 3% will cause

A)an increase in the real wage of 1% and an increase in un.
B)an increase in the real wage of 1% and a reduction in un.
C)an increase in the real wage of 3% and an increase in un.
D)an increase in the real wage of 3% and a reduction in un.

Question 48

When the unemployment rate is on the horizontal axis and the real wage is on the vertical axis,a reduction in productivity will cause which of the following to occur?

A)the wage-setting and price-setting curves will both shift downward.
B)the wage-setting and price-setting curves will both shift upward.
C)the price-setting curve to shift downward,and no shift in the wage-setting curve.
D)the wage-setting curve to shift upward,and the price-setting curve to shift downward.
E)the wage-setting curve to shift downward,and the price-setting curve to shift upward.

Question 49

Assume an economy experiences,for a given period,a 5% increase in output and a 1% increase in productivity.Given this information,we know that which of the following occurred for this economy during this period?

A)the unemployment rate increased during this period
B)the unemployment rate decreased during this period
C)the unemployment rate did not change during this period
D)the effects on the unemployment rate are ambiguous
E)none of the above

Question 50

Among the reasons that the poor countries have been unable to close the "technology gap" with the rich countries is

A)poorly established property rights.
B)poorly developed financial markets.
C)low education levels.
D)all of the above
E)none of the above

Question 51

Based on price setting behavior,which of the following will cause a reduction in the price level?

A)an increase in productivity
B)a reduction in the nominal wage
C)a reduction in the markup
D)all of the above
E)none of the above

Question 52

Suppose an economy experiences a reduction in productivity.Explain both the short-run and medium-run effects of this reduction in productivity on output,employment,and the unemployment rate.

Question 53

For this question,assume that expectations of productivity are slow to adjust.Further assume that A had been increasing by 2% a year.Now suppose that A increases by 5% in period t.This increase in productivity growth will cause

A)the real wage to rise and no change in the natural rate of unemployment.
B)the WS relation to shift up more than the PS relation.
C)the natural rate of unemployment to fall.
D)the real wage to fall.

Question 54

Based on price setting behavior,which of the following will cause a reduction in the price level?

A)an increase in productivity
B)a reduction in the nominal wage
C)a reduction in the markup
D)all of the above
E)none of the above

Question 55

For this question,assume that expectations of P and A are correct.Now suppose that there is a 1% increase in A.Given this information,which of the following will occur?

A)a 1% increase in the real wage and a reduction in the natural rate of unemployment.
B)a 1% increase in the real wage and no change in the natural rate of unemployment.
C)no change in the real wage and an increase in the natural rate of unemployment.
D)no change in the real wage and a reduction in the natural rate of unemployment.

Question 56

For this question,assume expectations of P and A are correct.Now suppose that there is a 3% reduction in A.Given this information,which of the following will occur?

A)the PS relation will shift up by 2%.
B)the WS relation will shift down by less than 2%.
C)the WS relation will shift down by 2%.
D)there will be no change in the real wage.

Question 57

Some commentators will argue that increases in productivity may have no effect or even a negative effect on employment in the short run.Explain what must occur for an increase in productivity to have no effect or even a negative effect on employment in short run.

Question 58

Suppose workers' and firms' expectations of the price level and productivity are accurate.In this case,a reduction in productivity will cause which of the following?

A)a decrease in both the real wage and the natural rate of unemployment.
B)an increase in both the real wage and the natural rate of unemployment.
C)a decrease in the real wage and no change in the natural rate of unemployment.
D)an increase in the real wage and a decrease in the natural rate of unemployment.
E)none of the above

Question 59

Suppose an economy experiences an increase in productivity.The AD curve will most likely shift to the right when this increase in productivity is the result of which of the following?

A)a major technological breakthrough
B)a reorganization of production designed to reduce costs with existing technology
C)an increase in human capital
D)government subsidies for higher education
E)none of the above

Question 60

Employment will increase as a result of an increase in productivity when which of the following occurs?

A)the AS curve shifts upward
B)output growth is more than productivity growth
C)productivity growth is more than output growth
D)the AD curve shifts to the left
E)none of the above

Question 61

Using the AS / AD model,graphically illustrate and explain the short-run effect of an increase in productivity.In your graph,clearly label all curves and equilibria.

Question 62

Explain how technological change can cause changes in wage inequality.

Question 63

Suppose an economy experiences an increase in productivity.Explain both the short-run and medium-run effects of this increase in productivity on output,employment,and the unemployment rate.

Question 64

For this question,assume that expectations of productivity growth adjust slowly.Now,suppose that there is a 5% increase in productivity.Explain how this 5% increase in productivity can cause changes in the unemployment rate.

Question 65

First,explain each of the following: hysterisis and Eurosclerosis.Second,explain how each of them can be used to explain the relatively high natural rate of unemployment in Europe.

Question 66

Assume expectations of both prices and productivity are accurate,use the PS / WS relations,graphically illustrate and explain the effects of an increase in the productivity on the natural rate of unemployment.

Question 67

Explain some of the causes of increased wage inequality.

Question 68

For this question,assume that expectations of productivity growth adjust slowly.Now,suppose that there is a 3% reduction in productivity.Explain how this 3% reduction in productivity can cause changes in the unemployment rate.

Question 69

Suppose an economy is characterized by the equations below:
Price setting: P= (1+m) (W / A)
Wage setting: W=AP(1-u)
Solve for the natural rate of unemployment if the markup (m)is equal to 4%.

Question 70

Assume expectations of prices are correct but expectations of productivity adjust slowly.Use the PS / WS relations,graphically illustrate and explain the effects of a decrease in productivity growth on the natural rate of unemployment.

Question 71

Using the AS / AD model,graphically illustrate and explain the short-run and medium-run effects of a reduction in productivity.In your graph,clearly label all curves and equilibria.For simplicity,assume that the change in productivity has no effect on aggregate demand.