Question 1

The quantity of labor demanded by a firm depends upon

Accepted Answer

A)  the nominal wage rate not the real wage rate. 
B)  the real wage rate not the nominal wage rate. 
C)  both the real wage rate and the nominal wage rate. 
D)  neither the real wage rate nor the nominal wage rate. 
E)  either the real wage rate or the nominal wage rate, depending whether the price level is increasing or decreasing. 
A)  the nominal wage rate not the real wage rate. 
B)  the real wage rate not the nominal wage rate. 
C)  both the real wage rate and the nominal wage rate. 
D)  neither the real wage rate nor the nominal wage rate. 
E)  either the real wage rate or the nominal wage rate, depending whether the price level is increasing or decreasing.

Question 2

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Real wage rate Quantity of labor demanded } \
\text { (2005 dollars } \
\text { (millions of hours } \
\text { per hour) }
\end{array} & \begin{array} { c } 
\text { Quantity of labor supplied } \
\text { (millions of hours } \
\text { per month) }
\end{array} \
\hline 7.15 & 90 & 25 \
7.65 & 70 & 32 \
8.00 & 60 & 60 \
8.50 & 45 & 70 \
9.00 & 20 & 85 \
\hline
\end{array}$$
-The table above gives the labor market for a small foreign economy.A minimum wage law that sets the minimum wage rate at $8.50 per hour produces

Accepted Answer

A)  equilibrium in the labor market. 
B)  a labor surplus of 25 million hours. 
C)  a labor shortage of 25 million hours. 
D)  a labor surplus of $0.50 per hour. 
E)  a labor surplus of 65 million hours. 
A)  equilibrium in the labor market. 
B)  a labor surplus of 25 million hours. 
C)  a labor shortage of 25 million hours. 
D)  a labor surplus of $0.50 per hour. 
E)  a labor surplus of 65 million hours.

Question 3

Suppose the full-employment equilibrium wage rate is $11 per hour while the real wage rate is $12 per hour.As a result,

Accepted Answer

A)  job rationing will occur. 
B)  job search will decline. 
C)  a positive Okun gap will occur. 
D)  the production function will shift downward. 
E)  job rationing will decrease. 
A)  job rationing will occur. 
B)  job search will decline. 
C)  a positive Okun gap will occur. 
D)  the production function will shift downward. 
E)  job rationing will decrease.

Question 4

Job rationing occurs when the real wage is ________ the equilibrium level and there is a ________ of labor.

Accepted Answer

A)  above; shortage 
B)  above; surplus 
C)  below; shortage 
D)  below; surplus 
E)  equal to; shortage 
A)  above; shortage 
B)  above; surplus 
C)  below; shortage 
D)  below; surplus 
E)  equal to; shortage

Question 5

An efficiency wage

Accepted Answer

A)  is set above the equilibrium real wage to induce greater work effort. 
B)  is set below the equilibrium real wage to reduce labor costs. 
C)  increases the supply of labor and therefore increases potential GDP. 
D)  increases the demand for labor and therefore increases potential GDP. 
E)  reduces frictional unemployment. 
A)  is set above the equilibrium real wage to induce greater work effort. 
B)  is set below the equilibrium real wage to reduce labor costs. 
C)  increases the supply of labor and therefore increases potential GDP. 
D)  increases the demand for labor and therefore increases potential GDP. 
E)  reduces frictional unemployment.

Question 6

The real wage rate is the ________ divided by the ________.

Accepted Answer

A)  quantity of labor demanded; quantity of labor supplied 
B)  nominal wage rate; price level 
C)  quantity of labor supplied; quantity of labor demanded 
D)  nominal wage rate; inflation rate 
E)  equilibrium quantity of employment; potential GDP 
A)  quantity of labor demanded; quantity of labor supplied 
B)  nominal wage rate; price level 
C)  quantity of labor supplied; quantity of labor demanded 
D)  nominal wage rate; inflation rate 
E)  equilibrium quantity of employment; potential GDP

Question 7

-If the government raises income taxes, then the equilibrium amount of employment ________ and potential GDP ________.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  does not change; does not change 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  does not change; does not change

Question 8

Job search can be expected to decrease it

Accepted Answer

A)  a technological change creates a structural boom. 
B)  the Okun Gap increases. 
C)  the Lucas Wedge increases. 
D)  job rationing decreases. 
E)  the natural rate of unemployment decreases. 
A)  a technological change creates a structural boom. 
B)  the Okun Gap increases. 
C)  the Lucas Wedge increases. 
D)  job rationing decreases. 
E)  the natural rate of unemployment decreases.

Question 9

As long as an additional worker hired by a firm produces

Accepted Answer

A)  more output than the real wage rate, the firm will hire that worker. 
B)  more output than the real wage rate, the firm will not hire that worker. 
C)  less output than the real wage rate, the firm will hire that worker. 
D)  some output, the firm will hire that worker. 
E)  more output than the nominal wage rate, the firm will hire that worker. 
A)  more output than the real wage rate, the firm will hire that worker. 
B)  more output than the real wage rate, the firm will not hire that worker. 
C)  less output than the real wage rate, the firm will hire that worker. 
D)  some output, the firm will hire that worker. 
E)  more output than the nominal wage rate, the firm will hire that worker.

Question 10

As more labor is hired, moving along the production function diminishing returns occur because

Accepted Answer

A)  workers are overworked and so their productivity decreases. 
B)  the wage rate paid is too low and so workers decrease their work effort. 
C)  there are fixed quantities of other resources. 
D)  the real wage rate must increase in order to hire additional workers. 
E)  real GDP increases more rapidly the more workers are hired. 
A)  workers are overworked and so their productivity decreases. 
B)  the wage rate paid is too low and so workers decrease their work effort. 
C)  there are fixed quantities of other resources. 
D)  the real wage rate must increase in order to hire additional workers. 
E)  real GDP increases more rapidly the more workers are hired.

Question 11

The sustainable upper limit of real GDP is a level of GDP that is

Accepted Answer

A)  greater than potential GDP, but by how much greater is unknown and controversial. 
B)  less than potential GDP, but by how much less is unknown and controversial. 
C)  potential GDP. 
D)  determined only by what is the full employment equilibrium in the labor market. 
E)  None of the above answers is correct because there is no sustainable upper limit to real GDP because real GDP can always be increased. 
A)  greater than potential GDP, but by how much greater is unknown and controversial. 
B)  less than potential GDP, but by how much less is unknown and controversial. 
C)  potential GDP. 
D)  determined only by what is the full employment equilibrium in the labor market. 
E)  None of the above answers is correct because there is no sustainable upper limit to real GDP because real GDP can always be increased.

Question 12

As demonstrated by the labor supply schedule, the quantity of labor supplied depends on

Accepted Answer

A)  the nominal wage. 
B)  the amount of labor that firms want to hire. 
C)  the real wage. 
D)  the value of the dollar. 
E)  workers' productivity. 
A)  the nominal wage. 
B)  the amount of labor that firms want to hire. 
C)  the real wage. 
D)  the value of the dollar. 
E)  workers' productivity.

Question 13

Define potential GDP.Under what circumstances does actual real GDP fall short of potential GDP, equal potential GDP, and exceed potential GDP?

Accepted Answer

Potential GDP is the level of real GDP t

Question 14

If we compare the Canadian natural unemployment rate to the U.S.natural unemployment rate, we find that for most years since 1980

Accepted Answer

A)  they are essentially the same because we have a lot in common. 
B)  the Canadian rate is higher, possibly the result of higher unemployment benefits in Canada. 
C)  the U.S.rate is higher, possibly the result of greater job search within a larger country. 
D)  the Canadian rate is higher, possibly the result of higher unemployment benefits in the United States. 
E)  The U.S.rate is higher, possibly the result of more structural change occurring in the United States. 
A)  they are essentially the same because we have a lot in common. 
B)  the Canadian rate is higher, possibly the result of higher unemployment benefits in Canada. 
C)  the U.S.rate is higher, possibly the result of greater job search within a larger country. 
D)  the Canadian rate is higher, possibly the result of higher unemployment benefits in the United States. 
E)  The U.S.rate is higher, possibly the result of more structural change occurring in the United States.

Question 15

A country reports that its actual real GDP is greater than its potential GDP.It must be that

Accepted Answer

A)  an error was made when calculating actual real GDP. 
B)  the price level is increasing. 
C)  more workers decided to quit work in order to enjoy leisure time. 
D)  the excess by which real GDP exceeds potential GDP is only temporary and eventually real GDP will decrease to be equal to potential GDP. 
E)  None of the above answers is correct because it is impossible for a country's real GDP to exceed its potential GDP. 
A)  an error was made when calculating actual real GDP. 
B)  the price level is increasing. 
C)  more workers decided to quit work in order to enjoy leisure time. 
D)  the excess by which real GDP exceeds potential GDP is only temporary and eventually real GDP will decrease to be equal to potential GDP. 
E)  None of the above answers is correct because it is impossible for a country's real GDP to exceed its potential GDP.

Question 16

_______ in the United States ________ in most European countries.

Accepted Answer

A)  Potential GDP; is greater than potential GDP. 
B)  Real wages; are greater than real wages. 
C)  The Okun Gap; is equal to the Okun Gap. 
D)  The Lucas Wedge; is greater than the Lucas Wedge. 
E)  Both A and B are true. 
A)  Potential GDP; is greater than potential GDP. 
B)  Real wages; are greater than real wages. 
C)  The Okun Gap; is equal to the Okun Gap. 
D)  The Lucas Wedge; is greater than the Lucas Wedge. 
E)  Both A and B are true.

Question 17

The labor market is in equilibrium whenever

Accepted Answer

A)  the nominal wage is decreasing. 
B)  the nominal wage is increasing. 
C)  the real wage is decreasing. 
D)  the real wage is increasing. 
E)  the quantity of labor demanded equals the quantity of labor supplied. 
A)  the nominal wage is decreasing. 
B)  the nominal wage is increasing. 
C)  the real wage is decreasing. 
D)  the real wage is increasing. 
E)  the quantity of labor demanded equals the quantity of labor supplied.

Question 18

The production function shows that as employment increases, real GDP

Accepted Answer

A)  increases at an increasing rate. 
B)  increases at a decreasing rate. 
C)  increases at a constant rate. 
D)  decreases at a decreasing rate. 
E)  increases until it reaches potential GDP and then it starts to decrease. 
A)  increases at an increasing rate. 
B)  increases at a decreasing rate. 
C)  increases at a constant rate. 
D)  decreases at a decreasing rate. 
E)  increases until it reaches potential GDP and then it starts to decrease.

Question 19

A minimum wage rate that is set ________ the equilibrium real wage rate creates a ________ of labor.

Accepted Answer

A)  above; surplus 
B)  above; shortage 
C)  below; surplus 
D)  below; shortage 
E)  equal to; shortage 
A)  above; surplus 
B)  above; shortage 
C)  below; surplus 
D)  below; shortage 
E)  equal to; shortage

Question 20

The natural unemployment rate is the result of

Accepted Answer

A)  bad government policies. 
B)  insufficient demand for labor. 
C)  job search and job rationing. 
D)  the Lucas wedge. 
E)  the Okun gap. 
A)  bad government policies. 
B)  insufficient demand for labor. 
C)  job search and job rationing. 
D)  the Lucas wedge. 
E)  the Okun gap.

The quantity of labor demanded by a firm depends upon

Suppose the full-employment equilibrium wage rate is $11 per hour while the real wage rate is $12 per hour.As a result,

Job rationing occurs when the real wage is the equilibrium level and there is a of labor.

An efficiency wage

The real wage rate is the divided by the .

-If the government raises income taxes, then the equilibrium amount of employment and potential GDP .

Job search can be expected to decrease it

As long as an additional worker hired by a firm produces

As more labor is hired, moving along the production function diminishing returns occur because

The sustainable upper limit of real GDP is a level of GDP that is

As demonstrated by the labor supply schedule, the quantity of labor supplied depends on

Define potential GDP.Under what circumstances does actual real GDP fall short of potential GDP, equal potential GDP, and exceed potential GDP?

If we compare the Canadian natural unemployment rate to the U.S.natural unemployment rate, we find that for most years since 1980

A country reports that its actual real GDP is greater than its potential GDP.It must be that

_ in the United States __ in most European countries.

The labor market is in equilibrium whenever

The production function shows that as employment increases, real GDP

A minimum wage rate that is set the equilibrium real wage rate creates a of labor.

The natural unemployment rate is the result of

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Exam 8: Potential Gdp and the Natural Unemployment Rate

The quantity of labor demanded by a firm depends upon

Suppose the full-employment equilibrium wage rate is $11 per hour while the real wage rate is $12 per hour.As a result,

Job rationing occurs when the real wage is ________ the equilibrium level and there is a ________ of labor.

An efficiency wage

The real wage rate is the ________ divided by the ________.

-If the government raises income taxes, then the equilibrium amount of employment ________ and potential GDP ________.

Job search can be expected to decrease it

As long as an additional worker hired by a firm produces

As more labor is hired, moving along the production function diminishing returns occur because

The sustainable upper limit of real GDP is a level of GDP that is

As demonstrated by the labor supply schedule, the quantity of labor supplied depends on

Define potential GDP.Under what circumstances does actual real GDP fall short of potential GDP, equal potential GDP, and exceed potential GDP?

If we compare the Canadian natural unemployment rate to the U.S.natural unemployment rate, we find that for most years since 1980

A country reports that its actual real GDP is greater than its potential GDP.It must be that

_______ in the United States ________ in most European countries.

The labor market is in equilibrium whenever

The production function shows that as employment increases, real GDP

A minimum wage rate that is set ________ the equilibrium real wage rate creates a ________ of labor.

The natural unemployment rate is the result of

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Economic Growth

Finance, Saving, and Investment

The Monetary System

Money, Interest, and Inflation

Aggregate Supply and Aggregate Demand

Aggregate Expenditure Multiplier

The Short-Run Policy Tradeoff

Fiscal Policy

Monetary Policy

International Trade Policy

International Finance

Filters

Job rationing occurs when the real wage is the equilibrium level and there is a of labor.

The real wage rate is the divided by the .

-If the government raises income taxes, then the equilibrium amount of employment and potential GDP .

_ in the United States __ in most European countries.

A minimum wage rate that is set the equilibrium real wage rate creates a of labor.