Exam 7:The Economy at Full Employment

Draw a graph illustrating a labor market in equilibrium. Illustrate and explain the effect of an increase in the capital stock.

Consider a two-input production function, one of which is increasing while the other is fixed. At the point of diminishing returns, output will

Recall the Application about European soccer stars choosing to play for clubs in countries with lower tax rates to reduce their taxes to answer the following question(s). A study conducted by economists Henrik Jacobsen Kleven, Camille Landais,and Emmanuel Saez found that top tax rates and tax breaks do matter when soccer stars choose where to locate. -Recall the Application. If country A has a lower overall income tax rate than country B, and labor can freely and easily move between the two countries, ________ in country A will tend to ________.

The marginal principle dictates that marginal cost should equal marginal benefit.

When an economy is at full employment, the unemployment rate is zero percent.

Investments made "today" in machines, equipment and buildings do not have an immediate effect on total capital stock.

An increase in the employment tax should have a relatively small effect on output if the labor supply curve

The labor supply and demand most directly affect the level of ________ in an economy.

An open economy has ________ included in the GDP.

In 2010, which of the following countries was the only one having negative net export spending in GDP?

There is an inverse relationship between the amount of labor supplied and real wages.

Recall the Application which questions whether a standard real business cycle model can be used to explain both the origin and severity of the Great Depression to answer the following question(s). -According to the Application, to help explain the behavior of real wages during the Great Depression, economists Harold L. Cole and Lee E. Ohanian extended the standard real business cycle model to include

Suppose that workers decrease their taste for leisure, and thus require less time away from work. What is likely to happen to wages and the quantity of labor hired?

In 2010, China's share of investment spending as a percentage of GDP was ________ Germany's share.

An increase in the supply of labor will ________ real wages and ________ employment.

When the economy operates below full employment, an increase in government spending must crowd out another component of GDP.

In equilibrium, the quantity of labor demanded is ________ the quantity of labor supplied.

Recall the Application which questions whether a standard real business cycle model can be used to explain both the origin and severity of the Great Depression to answer the following question(s). -According to the Application, during the Great Depression, real wages ________, which is ________ with a standard real business cycle model.

By providing workers with more machines, equipment and buildings to use in the production of goods, production would decrease.

Fluctuations in economic activity can result from