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Topics: Inflation, Unemployment, Economics Pages: 15 (2517 words) Published: November 10, 2013
1. Which of the following is NOT in the labor force?

a. Discouraged workers
b. Those who worked full time, but in a family business
c. Those temporarily laid off who will be recalled soon
d. The unemployed
e. All of the above

For the question below, assume the following. The non-institutional civilian population is 400 million, of which 200 million are employed and 16 million are unemployed.

2. Based on the above, the labor force participation rate is

a. 4%
b. 5%
c. 7.4%
d. 8%
e. None of the above

3. Which of the following variables is most directly determined in the labor market?

a. Interest rates
b. Nominal wages
c. Stock prices
d. All of the above
e. None of the above

4. The reservation wage is

a. The wage offer that will end a labor strike
b. The lowest wage firms are allowed to pay workers
c. The wage that ensures a laid-off individual will wait for re-hire, rather than find another job. d. The wage that an employer must pay workers to reduce turnover to a reasonable level. e. None of the above.

5. The efficiency wage theory suggests that

a. Firms will be more resistant to wage increases as the labor market tightens. b. The government can only set rax rates so high before people prefer not to work. c. Unskilled workers will have a lower turnover rate than skilled workers. d. D. Workers will be paid less than their reservation wage. e. Productivity might drop if the wage rate is too low.

6. In the wage setting relation, the nominal wage increases when

a. The price level rises.
b. Unemployment benefits fall.
c. The minimum wage falls.
d. The unemployment rate rises.
e. All of the above.

7. For this question, assume there is perfect competition in the product market. Given this assumption, we know that m in the price setting equation P = (!+m)W will equal

a. P.
b. 1.
c. 0.
d. W.
e. W/P.

8. The natural rate of unemployment is the rate of unemployment

a. That occurs when the money market is in equilibrium.
b. That occurs when both the goods and financial markets are in equilibrium. c. That occurs when the markup of prices over costs is zero. d. Where the markup of prices over costs is equal to its historical value. e. None of the above.

9. Suppose the actual unemployment rate decreases. This will cause

a. A downward shift in the WS curve.
b. An upward shift in the PS curve
c. A movement along the WS ad PS curves.
d. An upward shift in the WS curve.
e. None of the above.

10. Suppose the aggregate production function is given by the following: Y = N. Given this information, we know that labor productivity is represented by the following:

a. 1/N.
b. N/Y.
c. 1.
d. N.

11. Assume that product markets become less competitive in the U.S. Given this information, we wold expect to observe which of the following?

a. An upward shift in the WS curve.
b. A downward shift in the WS curve.
c. An upward shift in the PS curve.
d. A downward shift in the PS curve.
e. None of the above.

12. Based on our understanding of the labor market model presented in Chapter 6, we know that a reduction in the markup will cause

a. An increase in the equilibrium real wage.
b. A reduction in the equilibrium real wage.
c. An increase in the natural eate of unemployment.
d. A reduction in the natural rate of unemployment and no change in the real wage.

13. In the aggregate supply relation, the current price level depends upon:

a. Fiscal policy.
b. Consumer confidence.
c. Monetary policy.
d. Expected price level.
e. All of the above.

14. Suppose that the current price level is equal to the expected price level. Given this information, we know with certainty that

a. The goods market and financial markets are in equilibrium. b. The unemployment rate is equal to the natural rate of unemployment. c. The unemployment rate is zero.
d. Both the price level and the expected price level are equal to one. e. None of he above....
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