Question 1

If, as a result of imperfect information, firms set their wage rates ________ the market clearing wage rate, there will be a surplus of workers.

Accepted Answer

A)  above 
B)  below 
C)  at 
D)  above or below

Question 2

Refer to the information provided in Figure 28.7 below to answer the question(s) that follow.  Figure 28.7
-Refer to Figure 28.7. Suppose the economy is at Point C. What can possibly move the economy to Point D?

Accepted Answer

A)  a leftward shift in the AD curve 
B)  a rightward shift in the AD curve 
C)  a leftward shift in the AS curve 
D)  a rightward shift in the AS curve

Question 3

If the relationship between the change in the inflation rate and the unemployment rate is depicted by the PP curve, then the value of the unemployment rate where the PP curve crosses zero is the nonaccelerating inflation rate of unemployment.

Accepted Answer

A) True 
 B)False

Question 4

An increase in worker productivity

Accepted Answer

A)  reduces the demand for labor. 
B)  increases the demand for labor. 
C)  reduces the supply of labor. 
D)  increases the supply of labor.

Question 5

The unemployment rate is

Accepted Answer

A)  the number unemployed divided by the labor force. 
B)  the number unemployed divided by the number employed. 
C)  the number unemployed divided by the population. 
D)  the difference between the population and the number employed divided by the population.

Question 6

Changes in the price level don't affect the unemployment rate if

Accepted Answer

A)  the economy is operating below capacity. 
B)  the economy is operating at capacity. 
C)  the aggregate supply curve is flat. 
D)  the aggregate demand curve is steep.

Question 7

If inflation expectations change as a result of an expansionary fiscal policy, this causes

Accepted Answer

A)  the long-run Phillips curve to shift. 
B)  the short-run Phillips curve to shift. 
C)  the short-run Phillips curve to remain constant. 
D)  a movement along the short-run Phillips curve.

Question 8

Refer to the information provided in Figure 28.8 below to answer the question(s) that follow.  Figure 28.8
-Refer to Figure 28.8. Expected inflation at Point B equals

Accepted Answer

A)  4%. 
B)  5%. 
C)  6%. 
D)  cannot be determined from the figure.

Question 9

Martin is not employed. The value Martin places on his leisure time is $30 an hour. Martin looks for a job and all the offers he has are for less than $30 an hour. Martin should supply

Accepted Answer

A)  exactly 40 hours per week in the labor market. 
B)  between 0 and 20 hours per week in the labor market. 
C)  between 20 and 40 hours per week in the labor market. 
D)  0 hours in the labor market.

Question 10

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.

Question 11

What definition of unemployment would you expect classical economists to use?

Accepted Answer

A)  anyone who is actively seeking work 
B)  anyone who is willing to work if the market wage increases 
C)  anyone who is willing to work at the current market wage, but has not yet been able to find employment 
D)  anyone who is currently not working

Question 12

Frictional unemployment is the type that arises due to recessions.

Accepted Answer

A) True 
 B)False

Question 13

If the quantity of labor demanded and the quantity of labor supplied are brought into equilibrium by rising and falling wage rates, there should be no persistent unemployment and the unemployment rate should be zero.

Accepted Answer

A) True 
 B)False

Question 14

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.

Question 15

Refer to the information provided in Figure 28.3 below to answer the question(s) that follow.  Figure 28.3
-Refer to Figure 28.3. A minimum wage of ________ will lead to unemployment of 40.

Accepted Answer

A)  $8 
B)  $10 
C)  $12 
D)  > $12

Question 16

Doug is currently not employed. He places a value of $16 an hour on his time in nonmarket activities. If Doug is offered a job paying $12 an hour

Accepted Answer

A)  he should supply 0 hours in the labor market. 
B)  he should supply a positive number of hours in the labor market and allocate no time to nonmarket activities. 
C)  he is indifferent between supplying hours to the labor market and using his time in nonmarket activities. 
D)  he should supply a positive number of hours in the labor market and to nonmarket activities.

Question 17

A decline in the demand for labor means the unemployment rate must rise.

Accepted Answer

A) True 
 B)False

Question 18

Efficiency wages may increase worker productivity.

Accepted Answer

A) True 
 B)False

Question 19

The natural rate of unemployment is unemployment that occurs as a normal part of the functioning of the economy.

Accepted Answer

A) True 
 B)False

Question 20

Suppose the equilibrium wage rate in the labor market is $10 and the demand for labor increases. If wages are sticky, there will be a

Accepted Answer

A)  surplus of labor and the wage rate declines. 
B)  shortage of labor and the wage rate increases. 
C)  shortage of labor and the wage rate stays the same. 
D)  surplus of labor and the wage rate increases.

Exam 28: The Labor Market in the Macroeconomy

If, as a result of imperfect information, firms set their wage rates ________ the market clearing wage rate, there will be a surplus of workers.

Refer to the information provided in Figure 28.7 below to answer the question(s) that follow. Figure 28.7 -Refer to Figure 28.7. Suppose the economy is at Point C. What can possibly move the economy to Point D?

If the relationship between the change in the inflation rate and the unemployment rate is depicted by the PP curve, then the value of the unemployment rate where the PP curve crosses zero is the nonaccelerating inflation rate of unemployment.

An increase in worker productivity

The unemployment rate is

Changes in the price level don't affect the unemployment rate if

If inflation expectations change as a result of an expansionary fiscal policy, this causes

Refer to the information provided in Figure 28.8 below to answer the question(s) that follow. Figure 28.8 -Refer to Figure 28.8. Expected inflation at Point B equals

Martin is not employed. The value Martin places on his leisure time is $30 an hour. Martin looks for a job and all the offers he has are for less than $30 an hour. Martin should supply

If the economy is at potential output, expected inflation

What definition of unemployment would you expect classical economists to use?

Frictional unemployment is the type that arises due to recessions.

If the quantity of labor demanded and the quantity of labor supplied are brought into equilibrium by rising and falling wage rates, there should be no persistent unemployment and the unemployment rate should be zero.

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

Refer to the information provided in Figure 28.3 below to answer the question(s) that follow. Figure 28.3 -Refer to Figure 28.3. A minimum wage of ________ will lead to unemployment of 40.

Doug is currently not employed. He places a value of $16 an hour on his time in nonmarket activities. If Doug is offered a job paying $12 an hour

A decline in the demand for labor means the unemployment rate must rise.

Efficiency wages may increase worker productivity.

The natural rate of unemployment is unemployment that occurs as a normal part of the functioning of the economy.

Suppose the equilibrium wage rate in the labor market is $10 and the demand for labor increases. If wages are sticky, there will be a