Exam 8: Potential Gdp and the Natural Unemployment Rate

-Based on the production function in the above figure, which of the following is an attainable combination of labor and real GDP? i. 300 billion hours of labor and real GDP of $15 trillion ii. 300 billion hours of labor and real GDP of $6 trillion iii. 100 billion hours of labor and real GDP of $12 trillion

-The figure above shows the U.S.supply of labor curve.If there is a simultaneous increase in the nominal wage rate of 10 percent and a 10 percent increase in the price level, there will be a

If the amount paid as unemployment benefits decreases, the opportunity cost of job search

The idea of "diminishing returns" means that real GDP ________ as the quantity of labor increases.

A country's potential GDP is determined, in part, by

Suppose Germany's economy is experiencing full employment. This means that, in Germany,

Which of the following explain the natural rate of unemployment? i. job search. ii. the Okun Gap. iii. the production function

-The figure above shows the labor market in a small town. If the government imposes a wage of $10 that firms must at least pay, the government

Real wage rate (2005 dollars per hour) Quantity of labor demanded (billions of hours per year) Quantity of labor supplied (billions of hours per year) 40 200 320 35 220 310 30 240 300 25 260 290 20 280 280 15 300 270 -The table above shows the labor demand and labor supply schedules for a nation.The equilibrium real wage rate is ________ and the equilibrium quantity of labor is ________ billions of hours per year.

Potential GDP is the level of

As additional units of labor hours are employed, holding all other factors constant, along the production function,

Labor demand (billions of hours per year) Real wage rate (2005 dollars) Labor supply (billions of hours per year) 0 30 6 1 25 5 2 20 4 3 15 3 4 10 2 Employment (billions of hours per year) Real GDP (billions of 2005 dollars) 6 95 5 90 4 80 3 60 2 30 -The first table above gives the labor demand and labor supply schedules for a nation.The second table gives its production function. a. What is the equilibrium real wage rate and the level of employment? b. What is potential GDP?

Suppose that Australia has fully employed all of its resources. This situation means that Australia

Diminishing returns along a production function means that each additional hour of labor employed

Explain how the real wage and the extra output produced by each worker determine the quantity of labor demanded by a firm.

A surplus of labor is eliminated by ________ in the real wage rate and a shortage of labor is eliminated by ________ in the real wage rate.

The Classical macroeconomic model proposes that

More generous unemployment benefits ________ the opportunity cost of looking for a new job and therefore ________ the job search process

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

-The figure above shows the market for fast food restaurant employees in a college town in a small nation to the East.The local Taco Bell pays its workers $9 an hour.This wage rate is