Exam 7:The Economy at Full Employment

________ unemployment rises and falls with economic fluctuations.

Using the real business cycle theory, explain the effects of an adverse technological shock on the labor market and on the output market. Illustrate graphically how the adverse technology shock affects labor demand and supply. Why is this theory controversial?

In an open economy, increases in government spending can crowd out consumption, investment, or net exports.

If a firm increases its capital stock, real wages will likely ________ and the equilibrium quantity of labor will likely ________.

The real business cycle school of thought is generally viewed as controversial because

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, real wages in country B will tend to ________ and employment in country B will tend to ________.

Increased labor demand will result in

Suppose that workers develop a greater taste for leisure, and thus require more time away from work. What is likely to happen to wages and the quantity of labor hired?

Suppose that we observe that wages are falling while output is increasing. Holding the demand for output constant, what might cause this to happen?

Explain the concept of "crowding out" in a closed economy.

An increase in a firm's capital stock ________ in the marginal benefit of hiring labor.

Suppose that the government increases a tax paid by employers for hiring workers (for example, social security). What are the likely effects on real wages, output and employment? What are the likely magnitudes of these effects?

Full-employment output is the level of output that is produced when the labor market is in equilibrium.

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. -If the cost of hiring workers increases but the marginal benefit remains unchanged, employers are likely to respond by hiring ________ at any given wage.

In 2010, which of the following countries had the highest share of consumption spending in GDP?

Recall the Application about the level of real wages for laborers in England from 1350 to 1550 to answer the following question(s). In 1348, the bubonic plague, also known as the Black Death, arrived in England from Asia and caused a long decline in total population through the 1450s. -According to this Application, the decline in population resulting from the Black Death caused the ________ curve for labor to shift to the ________.

In 2010, which of the following countries had the highest share of investment spending in GDP?

Purchasing additional equipment for more people to use or share in a production environment usually results in a

If firms have more capital, it is ________ for workers.

According to real business cycle theorists, in modern times, economic fluctuations can largely be attributed to