Question 1

Job rationing occurs when the real wage rate is

Accepted Answer

A)  below the equilibrium wage rate so there is an excess supply of labor. 
B)  above the equilibrium wage rate so there is a shortage of labor. 
C)  equal to the equilibrium wage rate so there is no excess supply of labor. 
D)  above the equilibrium wage rate so there is an excess supply of labor. 
E)  Both answers A and D are correct because whenever the real wage rate is above or below the equilibrium wage rate, there is an excess supply of labor. 
A)  below the equilibrium wage rate so there is an excess supply of labor. 
B)  above the equilibrium wage rate so there is a shortage of labor. 
C)  equal to the equilibrium wage rate so there is no excess supply of labor. 
D)  above the equilibrium wage rate so there is an excess supply of labor. 
E)  Both answers A and D are correct because whenever the real wage rate is above or below the equilibrium wage rate, there is an excess supply of labor.

Question 2

The supply of labor curve has a ________ slope because as the real wage rate rises, ________.

Accepted Answer

A)  negative; firms hire fewer workers 
B)  positive; the opportunity cost of leisure rises 
C)  positive; the opportunity cost of leisure falls 
D)  negative; households work more hours 
E)  positive; firms offer more jobs 
A)  negative; firms hire fewer workers 
B)  positive; the opportunity cost of leisure rises 
C)  positive; the opportunity cost of leisure falls 
D)  negative; households work more hours 
E)  positive; firms offer more jobs

Question 3

The real wage rate is $35 an hour.At this wage rate there are 100 billion labor hours supplied and 200 billion labor hours demanded.There is a

Accepted Answer

A)  shortage of 300 billion hours of labor. 
B)  shortage of 100 billion hours of labor. 
C)  surplus of 100 billion hours of labor. 
D)  surplus of 300 billion hours of labor. 
E)  shortage of 200 billion hours of labor. 
A)  shortage of 300 billion hours of labor. 
B)  shortage of 100 billion hours of labor. 
C)  surplus of 100 billion hours of labor. 
D)  surplus of 300 billion hours of labor. 
E)  shortage of 200 billion hours of labor.

Question 4

Suppose that the Australian economy initially uses 50 billion hours of labor to produce $5 trillion of real GDP. If 50 billion more hours are employed and Australia's real GDP increases by $4 trillion more,

Accepted Answer

A)  Australia's production function exhibits diminishing returns. 
B)  Australia's production function exhibits increasing returns. 
C)  Australia has an Okun Wedge of $1 trillion. 
D)  Australia has positive Lucas wedge. 
E)  Australia's production possibility frontier has a positive slope. 
A)  Australia's production function exhibits diminishing returns. 
B)  Australia's production function exhibits increasing returns. 
C)  Australia has an Okun Wedge of $1 trillion. 
D)  Australia has positive Lucas wedge. 
E)  Australia's production possibility frontier has a positive slope.

Question 5

Potential GDP is the level of

Accepted Answer

A)  GDP that is impossible to achieve. 
B)  real GDP that the economy could produce at full employment. 
C)  nominal GDP that is smaller than the real GDP. 
D)  GDP that fluctuates around actual GDP. 
E)  GDP that would be produced if all workers were fully employed and there was no unemployment. 
A)  GDP that is impossible to achieve. 
B)  real GDP that the economy could produce at full employment. 
C)  nominal GDP that is smaller than the real GDP. 
D)  GDP that fluctuates around actual GDP. 
E)  GDP that would be produced if all workers were fully employed and there was no unemployment.

Question 6

When the labor market is in equilibrium,

Accepted Answer

A)  there is excess labor supplied, which keeps real GDP less than potential GDP. 
B)  there is full employment, which means that real GDP equals potential GDP. 
C)  the real wage rate falls to equal the nominal wage rate because real GDP is greater than potential GDP. 
D)  the real wage rate rises to allow real GDP to equal potential GDP. 
E)  there is full employment but real GDP might be greater than, less than, or equal to potential GDP. 
A)  there is excess labor supplied, which keeps real GDP less than potential GDP. 
B)  there is full employment, which means that real GDP equals potential GDP. 
C)  the real wage rate falls to equal the nominal wage rate because real GDP is greater than potential GDP. 
D)  the real wage rate rises to allow real GDP to equal potential GDP. 
E)  there is full employment but real GDP might be greater than, less than, or equal to potential GDP.

Question 7

Households increase the quantity of labor supplied when

Accepted Answer

A)  the real wage increases. 
B)  the real wage decreases. 
C)  job opportunities increase. 
D)  the nominal wage decreases and the price level rises. 
E)  income taxes increase. 
A)  the real wage increases. 
B)  the real wage decreases. 
C)  job opportunities increase. 
D)  the nominal wage decreases and the price level rises. 
E)  income taxes increase.

Question 8

8.3 Chapter Figures
  
-The figure above shows the U.S.production function.How would an increase in capital be shown in the figure?

Accepted Answer

A)  an upward shift or rotation of the production function 
B)  a downward shift or rotation of the production function 
C)  a movement from point A to point B 
D)  a movement from point C to point B 
E)  None of the above because the effects of an increase in capital cannot be shown in the figure. 
A)  an upward shift or rotation of the production function 
B)  a downward shift or rotation of the production function 
C)  a movement from point A to point B 
D)  a movement from point C to point B 
E)  None of the above because the effects of an increase in capital cannot be shown in the figure.

Question 9

What factors can push the real wage rate above its equilibrium level?
 Briefly explain each factor.

Accepted Answer

The three factors that can push the real

Question 10

-The above figure that most accurately shows a production function is

Accepted Answer

A)  Figure A. 
B)  Figure B. 
C)  Figure C. 
D)  Figure D. 
E)  Both Figure A and Figure B; Figure A for an economy with an excess of labor and Figure B for an economy with a shortage of labor. 
A)  Figure A. 
B)  Figure B. 
C)  Figure C. 
D)  Figure D. 
E)  Both Figure A and Figure B; Figure A for an economy with an excess of labor and Figure B for an economy with a shortage of labor.

Question 11

Efficiency wages are

Accepted Answer

A)  mandated by law. 
B)  set below the equilibrium level of the real wage. 
C)  offered by firms who want to reduce turnover in the labor force. 
D)  special wages offered to teenagers. 
E)  the result of demographic change. 
A)  mandated by law. 
B)  set below the equilibrium level of the real wage. 
C)  offered by firms who want to reduce turnover in the labor force. 
D)  special wages offered to teenagers. 
E)  the result of demographic change.

Question 12

Efficiency wages, above equilibrium minimum wage rates, and higher union wages are likely to

Accepted Answer

A)  increase the natural unemployment rate. 
B)  increase cyclical unemployment. 
C)  reduce the equilibrium real wage rate. 
D)  increase the equilibrium real wage rate. 
E)  decrease the natural unemployment rate. 
A)  increase the natural unemployment rate. 
B)  increase cyclical unemployment. 
C)  reduce the equilibrium real wage rate. 
D)  increase the equilibrium real wage rate. 
E)  decrease the natural unemployment rate.

Question 13

Over the business cycle, real GDP fluctuates around

Accepted Answer

A)  the business cycle trough. 
B)  the business cycle peak. 
C)  nominal GDP. 
D)  potential GDP. 
E)  the Lucas wedge. 
A)  the business cycle trough. 
B)  the business cycle peak. 
C)  nominal GDP. 
D)  potential GDP. 
E)  the Lucas wedge.

Question 14

If the economy is fully employed, which of the following is true?

Accepted Answer

A)  The price level equals 100. 
B)  Real and nominal GDP are equal. 
C)  Real and potential GDP are equal. 
D)  The unemployment rate is zero. 
E)  Real GDP cannot increase. 
A)  The price level equals 100. 
B)  Real and nominal GDP are equal. 
C)  Real and potential GDP are equal. 
D)  The unemployment rate is zero. 
E)  Real GDP cannot increase.

Question 15

Job rationing occurs if

Accepted Answer

A)  the minimum wage is set below the equilibrium wage rate. 
B)  an efficiency wage is set below the equilibrium wage rate. 
C)  a union wage is set below the equilibrium wage rate. 
D)  the real wage rate is pushed above the equilibrium wage rate. 
E)  the Lucas wedge is positive. 
A)  the minimum wage is set below the equilibrium wage rate. 
B)  an efficiency wage is set below the equilibrium wage rate. 
C)  a union wage is set below the equilibrium wage rate. 
D)  the real wage rate is pushed above the equilibrium wage rate. 
E)  the Lucas wedge is positive.

Question 16

-If the government raises income taxes, then the labor

Accepted Answer

A)  demand curve shifts rightward. 
B)  demand curve shifts leftward. 
C)  supply curve shifts rightward. 
D)  supply curve shifts leftward. 
E)  Both answers B and D are correct. 
A)  demand curve shifts rightward. 
B)  demand curve shifts leftward. 
C)  supply curve shifts rightward. 
D)  supply curve shifts leftward. 
E)  Both answers B and D are correct.

Question 17

If the real wage rate decreases from $9.00 per hour to $8.00 per hour, the

Accepted Answer

A)  quantity demanded of labor increases. 
B)  demand for labor increases. 
C)  quantity supplied of labor increases. 
D)  supply of labor increases. 
E)  equilibrium quantity of employment must decrease. 
A)  quantity demanded of labor increases. 
B)  demand for labor increases. 
C)  quantity supplied of labor increases. 
D)  supply of labor increases. 
E)  equilibrium quantity of employment must decrease.

Question 18

Potential GDP

Accepted Answer

A)  is the quantity of GDP produced when the economy is at full employment of all resources. 
B)  can never be exceeded. 
C)  can never be attained. 
D)  is another name for real GDP. 
E)  is another name for nominal GDP. 
A)  is the quantity of GDP produced when the economy is at full employment of all resources. 
B)  can never be exceeded. 
C)  can never be attained. 
D)  is another name for real GDP. 
E)  is another name for nominal GDP.

Question 19

The smaller the extent of job rationing, the

Accepted Answer

A)  lower potential GDP. 
B)  lower the unemployment rate. 
C)  lower the labor force participation rate. 
D)  higher the labor supply. 
E)  higher the real wage rate. 
A)  lower potential GDP. 
B)  lower the unemployment rate. 
C)  lower the labor force participation rate. 
D)  higher the labor supply. 
E)  higher the real wage rate.

Question 20

The more generous the amount of unemployment benefits, the

Accepted Answer

A)  higher the opportunity cost of job search. 
B)  lower the opportunity cost of job search. 
C)  shorter the time spent searching until accepting a suitable job. 
D)  shorter the time spent searching for a suitable job and the higher the opportunity cost of being unemployed. 
E)  lower the natural unemployment rate. 
A)  higher the opportunity cost of job search. 
B)  lower the opportunity cost of job search. 
C)  shorter the time spent searching until accepting a suitable job. 
D)  shorter the time spent searching for a suitable job and the higher the opportunity cost of being unemployed. 
E)  lower the natural unemployment rate.

Job rationing occurs when the real wage rate is

The supply of labor curve has a slope because as the real wage rate rises, .

The real wage rate is $35 an hour.At this wage rate there are 100 billion labor hours supplied and 200 billion labor hours demanded.There is a

Suppose that the Australian economy initially uses 50 billion hours of labor to produce $5 trillion of real GDP. If 50 billion more hours are employed and Australia's real GDP increases by $4 trillion more,

Potential GDP is the level of

When the labor market is in equilibrium,

Households increase the quantity of labor supplied when

8.3 Chapter Figures -The figure above shows the U.S.production function.How would an increase in capital be shown in the figure?

What factors can push the real wage rate above its equilibrium level? Briefly explain each factor.

-The above figure that most accurately shows a production function is

Efficiency wages are

Efficiency wages, above equilibrium minimum wage rates, and higher union wages are likely to

Over the business cycle, real GDP fluctuates around

If the economy is fully employed, which of the following is true?

Job rationing occurs if

-If the government raises income taxes, then the labor

If the real wage rate decreases from $9.00 per hour to $8.00 per hour, the

Potential GDP

The smaller the extent of job rationing, the

The more generous the amount of unemployment benefits, the

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

Job rationing occurs when the real wage rate is

The supply of labor curve has a ________ slope because as the real wage rate rises, ________.

The real wage rate is $35 an hour.At this wage rate there are 100 billion labor hours supplied and 200 billion labor hours demanded.There is a

Suppose that the Australian economy initially uses 50 billion hours of labor to produce $5 trillion of real GDP. If 50 billion more hours are employed and Australia's real GDP increases by $4 trillion more,

Potential GDP is the level of

When the labor market is in equilibrium,

Households increase the quantity of labor supplied when

8.3 Chapter Figures -The figure above shows the U.S.production function.How would an increase in capital be shown in the figure?

What factors can push the real wage rate above its equilibrium level? Briefly explain each factor.

-The above figure that most accurately shows a production function is

Efficiency wages are

Efficiency wages, above equilibrium minimum wage rates, and higher union wages are likely to

Over the business cycle, real GDP fluctuates around

If the economy is fully employed, which of the following is true?

Job rationing occurs if

-If the government raises income taxes, then the labor

If the real wage rate decreases from $9.00 per hour to $8.00 per hour, the

Potential GDP

The smaller the extent of job rationing, the

The more generous the amount of unemployment benefits, the

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

The supply of labor curve has a slope because as the real wage rate rises, .