Question 1

The existence of union wages, efficiency wages, and the minimum wage

Accepted Answer

A)  raises the real wage rate above the equilibrium wage rate and creates a shortage of labor. 
B)  lowers the real wage rate below the equilibrium wage rate and creates a shortage of labor. 
C)  raises the real wage rate above the equilibrium wage rate and raises the natural unemployment rate. 
D)  does not have an impact on the equilibrium wage rate or on the amount of unemployment. 
E)  raises the real wage rate above the equilibrium wage rate and lowers the natural unemployment rate. 
A)  raises the real wage rate above the equilibrium wage rate and creates a shortage of labor. 
B)  lowers the real wage rate below the equilibrium wage rate and creates a shortage of labor. 
C)  raises the real wage rate above the equilibrium wage rate and raises the natural unemployment rate. 
D)  does not have an impact on the equilibrium wage rate or on the amount of unemployment. 
E)  raises the real wage rate above the equilibrium wage rate and lowers the natural unemployment rate.

Question 2

In a labor market without an efficiency wage, minimum wage, or union wage, when the real wage rate is less than the equilibrium real wage rate, there is a ________ of labor and the real wage rate will ________.

Accepted Answer

A)  surplus; fall 
B)  shortage; fall 
C)  shortage; rise 
D)  surplus; rise 
E)  shortage; not change because it is fixed 
A)  surplus; fall 
B)  shortage; fall 
C)  shortage; rise 
D)  surplus; rise 
E)  shortage; not change because it is fixed

Question 3

Efficiency wages are

Accepted Answer

A)  the legal minimum wage a firm can pay a worker. 
B)  a possible cause of job rationing because they drive wages below their equilibrium level. 
C)  a possible cause of job rationing because they drive wages above their equilibrium level. 
D)  a possible cause of job rationing because they force wages to equal their equilibrium level. 
E)  another name for the equilibrium wage. 
A)  the legal minimum wage a firm can pay a worker. 
B)  a possible cause of job rationing because they drive wages below their equilibrium level. 
C)  a possible cause of job rationing because they drive wages above their equilibrium level. 
D)  a possible cause of job rationing because they force wages to equal their equilibrium level. 
E)  another name for the equilibrium wage.

Question 4

The demand for labor reflects the point that the

Accepted Answer

A)  lower the real wage rate, the greater the quantity of labor demanded. 
B)  higher the real wage rate, the greater the quantity of labor demanded. 
C)  real wage rate does not effect the quantity demanded of labor. 
D)  nominal wage rate and not the real wage rate determines the quantity of labor demanded. 
E)  demand for labor depends on the supply of labor. 
A)  lower the real wage rate, the greater the quantity of labor demanded. 
B)  higher the real wage rate, the greater the quantity of labor demanded. 
C)  real wage rate does not effect the quantity demanded of labor. 
D)  nominal wage rate and not the real wage rate determines the quantity of labor demanded. 
E)  demand for labor depends on the supply of labor.

Question 5

The length of time people spend in search of a job increases if

Accepted Answer

A)  the population ages. 
B)  unemployment benefits increase. 
C)  the criteria necessary to qualify for unemployment benefits increases. 
D)  there is a sudden change in technology. 
E)  the minimum wage is decreased. 
A)  the population ages. 
B)  unemployment benefits increase. 
C)  the criteria necessary to qualify for unemployment benefits increases. 
D)  there is a sudden change in technology. 
E)  the minimum wage is decreased.

Question 6

When all other influences on firms' hiring plans remain the same, the

Accepted Answer

A)  lower the real wage rate, the greater is the quantity of labor supplied 
B)  higher the real wage rate, the greater is the quantity of labor demanded. 
C)  lower the real wage rate, the smaller is the quantity of labor demanded. 
D)  lower the real wage rate, the greater is the quantity of labor demanded. 
E)  None of the above answers is correct because firm's hiring decisions depend on how profitable hiring a worker is, which depends on how much added profit the worker can create. 
A)  lower the real wage rate, the greater is the quantity of labor supplied 
B)  higher the real wage rate, the greater is the quantity of labor demanded. 
C)  lower the real wage rate, the smaller is the quantity of labor demanded. 
D)  lower the real wage rate, the greater is the quantity of labor demanded. 
E)  None of the above answers is correct because firm's hiring decisions depend on how profitable hiring a worker is, which depends on how much added profit the worker can create.

Question 7

The amount of real GDP produced at any one time depends on i) a fixed amount of capital
Ii) a fixed level of technology
Iii) decisions people make about leisure versus working

Accepted Answer

A)  ii only. 
B)  ii and iii. 
C)  i and ii. 
D)  i only. 
E)  i, ii and iii. 
A)  ii only. 
B)  ii and iii. 
C)  i and ii. 
D)  i only. 
E)  i, ii and iii.

Question 8

Which of the following will increase the natural unemployment rate?
i. a minimum wage set above the equilibrium wage.
ii. efficiency wages
iii. union-negotiated waged

Accepted Answer

A)  i only. 
B)  i and ii. 
C)  i and iii only. 
D)  ii and iii only. 
E)  i, ii and iii. 
A)  i only. 
B)  i and ii. 
C)  i and iii only. 
D)  ii and iii only. 
E)  i, ii and iii.

Question 9

The quantity of labor supplied increases as the real wage rises because

Accepted Answer

A)  higher real wages mean that nominal wages have increased. 
B)  the opportunity cost of working increases. 
C)  the quantity of labor demanded increases. 
D)  the opportunity cost of leisure rises. 
E)  labor force participation decreases so that only serious workers are left in the labor force. 
A)  higher real wages mean that nominal wages have increased. 
B)  the opportunity cost of working increases. 
C)  the quantity of labor demanded increases. 
D)  the opportunity cost of leisure rises. 
E)  labor force participation decreases so that only serious workers are left in the labor force.

Question 10

The production function displays

Accepted Answer

A)  increasing returns. 
B)  real returns. 
C)  diminishing returns. 
D)  average returns. 
E)  normal returns. 
A)  increasing returns. 
B)  real returns. 
C)  diminishing returns. 
D)  average returns. 
E)  normal returns.

Question 11

Diminishing returns, so that each additional hour of labor employed produces successively smaller additional amounts of real GDP, exist because

Accepted Answer

A)  labor is not very productive. 
B)  extra labor produces more output. 
C)  all other factors are held fixed. 
D)  the price level rises as more workers are employed. 
E)  additional workers are paid higher wage rates. 
A)  labor is not very productive. 
B)  extra labor produces more output. 
C)  all other factors are held fixed. 
D)  the price level rises as more workers are employed. 
E)  additional workers are paid higher wage rates.

Question 12

$$\begin{array} { c c c } 
\text { Real wage rate } & \begin{array} { c } 
\text { Labor demand } \
\text { (billions of } \
\text { (2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Labor supply } \
\text { (billions of }
\end{array} \
\hline 30 & 100 & 700 \
25 & 200 & 600 \
20 & 300 & 500 \
15 & 400 & 400 \
10 & 500 & 300
\end{array}$$ 
 $$\begin{array} { c c } 
\begin{array} { c } 
\text { Employment } \
\text { (billions of } \
\text { hours per year) }
\end{array} & \begin{array} { c } 
\text { Real GDP } \
\text { (trillions of 2005 } \
\text { dollars) }
\end{array} \
\hline 200 & 3.0 \
300 & 4.0 \
400 & 4.8 \
500 & 5.4 \
600 & 5.8 \
\hline
\end{array}$$
-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?

Accepted Answer

a. The equilibrium real wage rate is $15

Question 13

-In the above figure, a minimum wage will not change the unemployment rate if it is set at

Accepted Answer

A)  $6.00. 
B)  $9.00. 
C)  $12.00. 
D)  Both B and C are correct because any wage rate that exceeds $9 per hour has no effect on the unemployment rate. 
E)  None of the above because the minimum wage always affects the unemployment rate. 
A)  $6.00. 
B)  $9.00. 
C)  $12.00. 
D)  Both B and C are correct because any wage rate that exceeds $9 per hour has no effect on the unemployment rate. 
E)  None of the above because the minimum wage always affects the unemployment rate.

Question 14

What is an efficiency wage and what effect does it have in the labor market?

Accepted Answer

An efficiency wage rate is a wage that i

Question 15

What is job rationing and how does it relate to unemployment?
 What factors can lead to job rationing?
 Briefly explain these factors.

Accepted Answer

Job rationing occurs when the real wage

Question 16

A reason a nation faces diminishing returns along a production function is because

Accepted Answer

A)  unemployment always exists. 
B)  potential GDP is fixed. 
C)  the quantity of physical capital is fixed. 
D)  full employment is not possible. 
E)  the wage rate is fixed while moving along the production function. 
A)  unemployment always exists. 
B)  potential GDP is fixed. 
C)  the quantity of physical capital is fixed. 
D)  full employment is not possible. 
E)  the wage rate is fixed while moving along the production function.

Question 17

Which of the following would have the biggest payoff?

Accepted Answer

A)  Restoring real GDP growth to its 1960s growth rate. 
B)  Eliminating the Okun Gap. 
C)  Increasing the Okun Gap. 
D)  Making the Okun Gap equal the Lucas Wedge. 
E)  Increasing the Lucas Wedge. 
A)  Restoring real GDP growth to its 1960s growth rate. 
B)  Eliminating the Okun Gap. 
C)  Increasing the Okun Gap. 
D)  Making the Okun Gap equal the Lucas Wedge. 
E)  Increasing the Lucas Wedge.

Question 18

France is considering implementing policies that will reduce the duration of job search.A possible option is for France to

Accepted Answer

A)  increase the minimum wage. 
B)  help negotiate higher union benefits for employed workers. 
C)  reduce unemployment benefits. 
D)  require all residents between the ages of 19 and 26 to obtain a part-time or full-time job. 
E)  Both answers A n B are correct. 
A)  increase the minimum wage. 
B)  help negotiate higher union benefits for employed workers. 
C)  reduce unemployment benefits. 
D)  require all residents between the ages of 19 and 26 to obtain a part-time or full-time job. 
E)  Both answers A n B are correct.

Question 19

The real minimum wage rate

Accepted Answer

A)  has generally increased since 1967. 
B)  has generally decreased since 1967. 
C)  was at its highest level in 1995. 
D)  fell after 1967 until it reached a minimum around 1985 and has generally risen since then. 
E)  has stayed in the range between $6 and $5 (measured in 2005 dollars per hour) since 1967. 
A)  has generally increased since 1967. 
B)  has generally decreased since 1967. 
C)  was at its highest level in 1995. 
D)  fell after 1967 until it reached a minimum around 1985 and has generally risen since then. 
E)  has stayed in the range between $6 and $5 (measured in 2005 dollars per hour) since 1967.

Question 20

Discuss the production function.How does the production function relate to the labor market and potential GDP?

Accepted Answer

The production function shows the maximu

The existence of union wages, efficiency wages, and the minimum wage

In a labor market without an efficiency wage, minimum wage, or union wage, when the real wage rate is less than the equilibrium real wage rate, there is a of labor and the real wage rate will .

Efficiency wages are

The demand for labor reflects the point that the

The length of time people spend in search of a job increases if

When all other influences on firms' hiring plans remain the same, the

The amount of real GDP produced at any one time depends on i) a fixed amount of capital Ii) a fixed level of technology Iii) decisions people make about leisure versus working

Which of the following will increase the natural unemployment rate? i. a minimum wage set above the equilibrium wage. ii. efficiency wages iii. union-negotiated waged

The quantity of labor supplied increases as the real wage rises because

The production function displays

Diminishing returns, so that each additional hour of labor employed produces successively smaller additional amounts of real GDP, exist because

-In the above figure, a minimum wage will not change the unemployment rate if it is set at

What is an efficiency wage and what effect does it have in the labor market?

What is job rationing and how does it relate to unemployment? What factors can lead to job rationing? Briefly explain these factors.

A reason a nation faces diminishing returns along a production function is because

Which of the following would have the biggest payoff?

France is considering implementing policies that will reduce the duration of job search.A possible option is for France to

The real minimum wage rate

Discuss the production function.How does the production function relate to the labor market and potential GDP?

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 existence of union wages, efficiency wages, and the minimum wage

In a labor market without an efficiency wage, minimum wage, or union wage, when the real wage rate is less than the equilibrium real wage rate, there is a ________ of labor and the real wage rate will ________.

Efficiency wages are

The demand for labor reflects the point that the

The length of time people spend in search of a job increases if

When all other influences on firms' hiring plans remain the same, the

The amount of real GDP produced at any one time depends on i) a fixed amount of capital Ii) a fixed level of technology Iii) decisions people make about leisure versus working

Which of the following will increase the natural unemployment rate? i. a minimum wage set above the equilibrium wage. ii. efficiency wages iii. union-negotiated waged

The quantity of labor supplied increases as the real wage rises because

The production function displays

Diminishing returns, so that each additional hour of labor employed produces successively smaller additional amounts of real GDP, exist because

-In the above figure, a minimum wage will not change the unemployment rate if it is set at

What is an efficiency wage and what effect does it have in the labor market?

What is job rationing and how does it relate to unemployment? What factors can lead to job rationing? Briefly explain these factors.

A reason a nation faces diminishing returns along a production function is because

Which of the following would have the biggest payoff?

France is considering implementing policies that will reduce the duration of job search.A possible option is for France to

The real minimum wage rate

Discuss the production function.How does the production function relate to the labor market and potential GDP?

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

In a labor market without an efficiency wage, minimum wage, or union wage, when the real wage rate is less than the equilibrium real wage rate, there is a of labor and the real wage rate will .