Exam 7: The Economy at Full Employment

In an open economy, crowding out occurs when an increase in government spending results in:

When constructing a production function between labor and output, which of the following is not held constant?

An increase in the number of migrant workers into the country will shift the labor _______ curve to the _______ .

In the market for labor, the sellers of labor are:

When a profit- maximizing firm makes a decision to employ a worker, that decision is based on:

A production function describes the relationship between the quantity of inputs used in production and the quantity of output produced.

Movements of workers from one country to another can shift labor supply curves.

Recall Application 3, "Can Labor Market Policies Account for the Great Depression," to answer the following questions: -According to the application, what did Cole and Ohanian include in their business cycle models to explain the increase in real wages during the Great Depression?

When constructing a production function between labor and output, which is drawn on the Y- axis?

If the supply of labor decreases, which of the following events will occur?

When deciding whether to hire another worker, firms look at how the additional worker will affect:

If the labor supply curve were vertical, a tax on labor will cause:

The production function is Y = 3KL. If there are 10 units of capital and 50 units of labor, aggregate output is:

Because of diminishing returns, the production function has a slope that increases as the quantity of inputs used increases.

Classical economists assumed:

As the supply of plumbers in the U.S. declines, the wages paid to plumbers will rise.

Diminishing returns to labor implies that:

The crowding out effect explains how an increase in consumption expenditures can decrease government expenditure.

Explain how a more liberal immigration policy would affect the labor market equilibrium and the potential output in the economy.

What event led economists to question the usefulness of classical models in explaining how the true economy works?