Question 1

Classical economists believe that the aggregate supply curve is vertical because

Accepted Answer

A)  wages are flexible and they always change to clear the labor market. 
B)  the labor market is always in equilibrium. 
C)  people who are not working are those who have chosen not to work at the prevailing wage rate. 
D)  all of the above 
A)  wages are flexible and they always change to clear the labor market. 
B)  the labor market is always in equilibrium. 
C)  people who are not working are those who have chosen not to work at the prevailing wage rate. 
D)  all of the above

Question 2

An increase in worker productivity

Accepted Answer

A)  reduces the demand for labor. 
B)  increases the demand for labor. 
C)  reduces the supply of labor. 
D)  increases the supply of labor. 
A)  reduces the demand for labor. 
B)  increases the demand for labor. 
C)  reduces the supply of labor. 
D)  increases the supply of labor.

Question 3

If a household member is not in the labor force, it is because he or she has decided his or her time is more valuable in nonmarket activities.

Accepted Answer

A) True 
 B)False

Question 4

If, as a result of imperfect information, firms set their wage rates ________ the market clearing wage rate, there will be a shortage of workers.

Accepted Answer

A)  above 
B)  below 
C)  at 
D)  above or below 
A)  above 
B)  below 
C)  at 
D)  above or below

Question 5

What sequence of events results from an increase in aggregate demand?

Accepted Answer

A)  The price level falls, inventories decline, firms respond by increasing output and employment. 
B)  The price level falls, inventories increase, firms respond by reducing output and employment. 
C)  The price level rises, inventories decline, firms respond by increasing output and employment. 
D)  The price level rises, inventories increase, firms respond by increasing output and employment. 
A)  The price level falls, inventories decline, firms respond by increasing output and employment. 
B)  The price level falls, inventories increase, firms respond by reducing output and employment. 
C)  The price level rises, inventories decline, firms respond by increasing output and employment. 
D)  The price level rises, inventories increase, firms respond by increasing output and employment.

Question 6

If a new governmental policy increases unemployment benefits, we would expect the labor ________ curve to shift to the ________.

Accepted Answer

A)  supply; right 
B)  demand; right 
C)  supply; left 
D)  demand; left 
A)  supply; right 
B)  demand; right 
C)  supply; left 
D)  demand; left

Question 7

If, when recovering from an inflationary period, the inflation rate declines and the unemployment rate also declines, this could be the result of

Accepted Answer

A)  aggregate supply increasing at a faster rate than aggregate demand is decreasing. 
B)  aggregate supply increasing at a slower rate than aggregate demand is decreasing. 
C)  aggregate supply decreasing at a faster rate than aggregate demand is decreasing. 
D)  aggregate supply decreasing at a faster rate than aggregate demand is increasing. 
A)  aggregate supply increasing at a faster rate than aggregate demand is decreasing. 
B)  aggregate supply increasing at a slower rate than aggregate demand is decreasing. 
C)  aggregate supply decreasing at a faster rate than aggregate demand is decreasing. 
D)  aggregate supply decreasing at a faster rate than aggregate demand is increasing.

Question 8

A decrease in the value people place on their actual time spent working will shift the labor ________ curve to the ________.

Accepted Answer

A)  supply; right 
B)  supply; left 
C)  demand; right 
D)  demand; left 
A)  supply; right 
B)  supply; left 
C)  demand; right 
D)  demand; left

Question 9

If unemployment is below the natural rate of unemployment, then output is below potential output.

Accepted Answer

A) True 
 B)False

Question 10

If a new governmental policy decreases unemployment benefits, we would expect the labor ________ curve to shift to the ________.

Accepted Answer

A)  supply; right 
B)  demand; right 
C)  supply; left 
D)  demand; left 
A)  supply; right 
B)  demand; right 
C)  supply; left 
D)  demand; left

Question 11

If aggregate demand increases while aggregate supply is stable, aggregate output will ________ and the unemployment rate will ________.

Accepted Answer

A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease 
A)  increase; increase 
B)  increase; decrease 
C)  decrease; increase 
D)  decrease; decrease

Question 12

Which of the following may shift the labor demand curve?

Accepted Answer

A)  an increase in the value of leisure 
B)  a decrease in the value of leisure 
C)  more people entering the labor force 
D)  an increase in the value of output that firms produce 
A)  an increase in the value of leisure 
B)  a decrease in the value of leisure 
C)  more people entering the labor force 
D)  an increase in the value of output that firms produce

Question 13

Suppose that during a recession, Whirlpool saw the demand for its major appliances fall by one-third. Even though the demand decreased, Whirlpool chose to maintain wages for its non-union employees. This is an example of

Accepted Answer

A)  a relative-wage contract. 
B)  employment-at-will. 
C)  an explicit contract not to cut wages. 
D)  an implicit or social contract not to cut wages. 
A)  a relative-wage contract. 
B)  employment-at-will. 
C)  an explicit contract not to cut wages. 
D)  an implicit or social contract not to cut wages.

Question 14

Efficiency wage theory suggests that firms may hold wages above the market clearing rate because

Accepted Answer

A)  they believe that the productivity of workers increases with the wage rate. 
B)  unspoken agreements between workers and firms are in place. 
C)  it is required by law that they do so. 
D)  long-term contracts fix wage rates for a period of one to three years. 
A)  they believe that the productivity of workers increases with the wage rate. 
B)  unspoken agreements between workers and firms are in place. 
C)  it is required by law that they do so. 
D)  long-term contracts fix wage rates for a period of one to three years.

Question 15

The functioning of the labor market primarily affects the shape of the

Accepted Answer

A)  aggregate demand curve. 
B)  money demand curve. 
C)  aggregate supply curve. 
D)  planned investment curve. 
A)  aggregate demand curve. 
B)  money demand curve. 
C)  aggregate supply curve. 
D)  planned investment curve.

Question 16

Economists define the labor force to include

Accepted Answer

A)  only people who are working full-time. 
B)  people who are working. 
C)  people who are not working but are actively looking for a job, and people who are working. 
D)  all individuals of work age, regardless of whether they are working or looking for a job. 
A)  only people who are working full-time. 
B)  people who are working. 
C)  people who are not working but are actively looking for a job, and people who are working. 
D)  all individuals of work age, regardless of whether they are working or looking for a job.

Question 17

If inflationary expectations increase, the Phillips curve will

Accepted Answer

A)  shift to the right. 
B)  shift to the left. 
C)  become vertical. 
D)  become upward sloping. 
A)  shift to the right. 
B)  shift to the left. 
C)  become vertical. 
D)  become upward sloping.

Question 18

One of the tenets of the classical view of the labor market is that the ________ adjustments are necessary to clear the labor market.

Accepted Answer

A)  wage 
B)  price 
C)  interest rate 
D)  all of the above 
A)  wage 
B)  price 
C)  interest rate 
D)  all of the above

Question 19

Refer to the information provided in Figure 13.8 below to answer the questions that follow.   Figure 13.8
-Refer to Figure 13.8. Along SRPC1, expected inflation equals

Accepted Answer

A)  6%. 
B)  5%. 
C)  4%. 
D)  cannot be determined from the figure 
A)  6%. 
B)  5%. 
C)  4%. 
D)  cannot be determined from the figure

Question 20

Refer to the information provided in Figure 13.8 below to answer the questions that follow.   Figure 13.8
-Refer to Figure 13.8. Along SRPC3, expected inflation equals

Accepted Answer

A)  4%. 
B)  5%. 
C)  6%. 
D)  cannot be determined from the figure 
A)  4%. 
B)  5%. 
C)  6%. 
D)  cannot be determined from the figure

Exam 13: The Labor Market in the Macroeconomy

Classical economists believe that the aggregate supply curve is vertical because

An increase in worker productivity

If a household member is not in the labor force, it is because he or she has decided his or her time is more valuable in nonmarket activities.

If, as a result of imperfect information, firms set their wage rates ________ the market clearing wage rate, there will be a shortage of workers.

What sequence of events results from an increase in aggregate demand?

If a new governmental policy increases unemployment benefits, we would expect the labor ________ curve to shift to the ________.

If, when recovering from an inflationary period, the inflation rate declines and the unemployment rate also declines, this could be the result of

A decrease in the value people place on their actual time spent working will shift the labor ________ curve to the ________.

If unemployment is below the natural rate of unemployment, then output is below potential output.

If a new governmental policy decreases unemployment benefits, we would expect the labor ________ curve to shift to the ________.

If aggregate demand increases while aggregate supply is stable, aggregate output will ________ and the unemployment rate will ________.

Which of the following may shift the labor demand curve?

Suppose that during a recession, Whirlpool saw the demand for its major appliances fall by one-third. Even though the demand decreased, Whirlpool chose to maintain wages for its non-union employees. This is an example of

Efficiency wage theory suggests that firms may hold wages above the market clearing rate because

The functioning of the labor market primarily affects the shape of the

Economists define the labor force to include

If inflationary expectations increase, the Phillips curve will

One of the tenets of the classical view of the labor market is that the ________ adjustments are necessary to clear the labor market.

Refer to the information provided in Figure 13.8 below to answer the questions that follow. Figure 13.8 -Refer to Figure 13.8. Along SRPC1, expected inflation equals

Refer to the information provided in Figure 13.8 below to answer the questions that follow. Figure 13.8 -Refer to Figure 13.8. Along SRPC3, expected inflation equals

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Introduction to Macroeconomics

Measuring National Output and National Income

Unemployment, Inflation, and Long-Run Growth

Aggregate Expenditure and Equilibrium Output

The Government and Fiscal Policy

Money, the Federal Reserve, and the Interest Rate

The Determination of Aggregate Output, the Price Level, and the Interest Rate

Policy Effects and Cost Shocks in the Asad Model

Financial Crises, Stabilization, and Deficits

Household and Firm Behavior in the Macroeconomy: a Further Look

Long-Run Growth

Alternative Views in Macroeconomics

International Trade, Comparative Advantage, and Protectionism

Open-Economy Macroeconomics: the Balance of Payments and Exchange Rates

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

If a new governmental policy increases unemployment benefits, we would expect the labor curve to shift to the .

A decrease in the value people place on their actual time spent working will shift the labor curve to the .

If a new governmental policy decreases unemployment benefits, we would expect the labor curve to shift to the .

If aggregate demand increases while aggregate supply is stable, aggregate output will and the unemployment rate will .

Refer to the information provided in Figure 13.8 below to answer the questions that follow. Figure 13.8 -Refer to Figure 13.8. Along SRPC₁, expected inflation equals

Refer to the information provided in Figure 13.8 below to answer the questions that follow. Figure 13.8 -Refer to Figure 13.8. Along SRPC₃, expected inflation equals