Question 1

Assume that 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?

Accepted Answer

A)  A decrease in unemployment. 
B)  An increase in unemployment. 
C)  An increase in employment. 
D)  No change in unemployment. 
E)  A decrease in employment.

Question 2

Which of the following statements about Australia during the 1996- 2011 period is correct?

Accepted Answer

A)  Output has increased largely due to monetary and fiscal policy. 
B)  Output has increased largely due to tax and exchange rate policy. 
C)  Output growth has been approximately equal to employment growth. 
D)  Output growth has been slower than employment growth. 
E)  Output growth has been faster than employment growth.

Question 3

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

Accepted Answer

A)   
B)   
C)   
D)   
E)

Question 4

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 economy?

Accepted Answer

A)  Employment has increased during this period. 
B)  The employment growth rate is negative during this period. 
C)  Employment has not changed during this period. 
D)  The effects on employment are ambiguous. 
E)  Employment has decreased during this period.

Question 5

Which of the following represents the broad definition of good institutions for economic growth?

Accepted Answer

A)  Strong sense of patriotism. 
B)  Protection of property rights. 
C)  Heavy punishments for violations of laws. 
D)  Tax incentives for investments. 
E)  Highly regulated markets.

Question 6

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

Accepted Answer

A)  1950. 
B)  1970. 
C)  1990. 
D)  2000. 
E)  2010.

Question 7

Based on our understanding of the price- setting equation, which of the following will not cause a decrease in the price level?

Accepted Answer

A)  A decrease in the nominal wage. 
B)  A decrease in productivity. 
C)  An increase in productivity. 
D)  A decrease in the markup. 
E)  A decrease in nominal wage to productivity ratio.

Question 8

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

Accepted Answer

The answer of Explain what effect a decrease in productivity...

Question 9

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:

Accepted Answer

A)  the WS relation to shift up more than the PS relation. 
B)  the PS and WS relations to shift up by the same amount. 
C)  the real wage to fall. 
D)  the PS relation to shift up more than the WS relation. 
E)  the natural rate of unemployment to fall.

Question 10

Which of the following is not true about technological progress?

Accepted Answer

A)  Cause a decrease in unemployment in the medium run. 
B)  Lead to the disappearance of old goods. 
C)  Cause a decrease in unemployment in the short run. 
D)  Allow for the production of a larger quantity of goods using the same number of workers. 
E)  Lead to the production of new goods.

Question 11

Because of labour hoarding, an increase in output may signal:

Accepted Answer

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

Question 12

"Churning" refers to:

Accepted Answer

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

Question 13

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

Accepted Answer

A)  International trade forces companies to relocate to low- cost countries. 
B)  An increase in the costs of going to university. 
C)  New types of production technology that require workers to have more skills. 
D)  All of the above. 
E)  None of the above.

Question 14

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

Accepted Answer

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

Question 15

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?

Accepted Answer

A)  Aggregate demand would shift to the right. 
B)  Both the aggregate demand and aggregate supply curves would shift to the right. 
C)  Aggregate demand would not change. 
D)  Both the aggregate demand and aggregate supply curves would shift to the left. 
E)  Aggregate demand would shift to the left.

Question 16

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 6% in period t. This increase in productivity growth will cause:

Accepted Answer

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

Question 17

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

Accepted Answer

A)  Y/A. 
B)  Y. 
C)  A/N. 
D)  A. 
E)  N/A.

Question 18

Using the AS- AD model, graphically illustrate and explain the short- run and medium- run effects of a decrease 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.

Accepted Answer

The answer of Using the AS- AD model, graphically illustrate...

Question 19

Explain some of the causes of increased wage inequality.

Accepted Answer

The answer of Explain some of the causes of increased...

Question 20

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.

Accepted Answer

The answer of Some commentators will argue that increases in...

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