Econ 204 Exam 1

Which of the following statements is correct? A. To maximize profits, firms set the wage at the level where the workers are indifferent between working and not working. B. If all firms set the same price and pay the same nominal wage, then the higher the real wage that they pay, the lower is their markup. C. In equilibrium, the wage clears the labor market, so there is no unemployment. D. Firms aim to set as high a price as possible.

B. If all firms set the same price and pay the same nominal wage, then the higher the real wage that they pay, the lower is their markup.

Which of the following was NOT a problem that arose from the great moderation? A. Rising debt B. Rising real wages C. Rising house prices D. Rising inequality

B. Rising real wages

Figure 17.16 is a graph of the unemployment rate and consumer price inflation in advanced economies between 1960 and 2013.Which of the following statements is correct? A. The unemployment rate and the inflation rate were consistently positively correlated during the stagflation period of the 1970s. B. Stagflation was caused by the shifting up of the Phillips curve, propelled by higher inflation expectations. C. As predicted by the Phillips curve, the unemployment rate rises whenever inflation falls and vice versa throughout the period depicted. D. The end of stagflation was characterized by falls in both the unemployment rate and the inflation rate.

B. Stagflation was caused by the shifting up of the Phillips curve, propelled by higher inflation expectations.

The following figure (top) shows the unemployment rate and productivity growth in the US between 1914 and 2015. Based on this information, which of the following statements is correct? A. The unemployment rate reached in the recent financial crisis was the highest since the stagflation years of 1973-79. B. The US economy's performance in 1979-2008 was less strong than during the other two boom periods, with a higher average unemployment rate and lower average productivity growth. C. The unemployment rate in more recent boom years is lower than unemployment rates in earlier boom years. D. There was a consistent fall in productivity growth during the Great Depression (1929 to 1941).

B. The US economy's performance in 1979-2008 was less strong than during the other two boom periods, with a higher average unemployment rate and lower average productivity growth.

The following figure (bottom) shows the income share of the top 1% richest households in the US between 1914 and 2013. Based on this information, which of the following statements are correct? A. Inequality always rises in boom years. B. The top 1% richest US households received nearly one-fifth of the total income in 2010 C.Inequality always falls during recessions or depressions. D. The great moderation era was distinct from the other two boom periods in that inequality rose during the period.

B. The top 1% richest US households received nearly one-fifth of the total income in 2010

The figure shows the wage-setting curve and the real wage w*. Based on this figure, which of the following statements is correct? A. The employment rate is 95%. B. The unemployment rate is 5% C. 4% of the population is unemployed D. The participation rate is 76% E. Disposable income is the maximum amount of expenditure possible without having to borrow or sell possessions.

B. The unemployment rate is 5%

Suppose that everyone who had been looking for a job for more than six months gave up in despair and stopped looking for a job. What would happen to the unemployment rate? A. It would not change B. It would increase C. It would decrease D. It would change, but the effect cannot be predicted

C. It would decrease

Imagine that you are responsible for policymaking in an economy that is experiencing a deep recession. You and your colleagues announce a number of measures (like those in Roosevelt's 'New Deal') that you tell everyone will boost demand and output. Why does it matter whether the public believes your announcement? A. It does not. The government's actions do not impact the macro economy. B. It does not. If the measures are appropriate, aggregate demand will increase, regardless of what anyone thinks. C. People will feel more confident about the future and increase their spending, which will reinforce the actions of government. D. You are more likely to be re-elected if people believe that you tried to do something

C. People will feel more confident about the future and increase their spending, which will reinforce the actions of government.

Which of the following scenarios would cause the wage-setting curve to shift down? A. Increase in unemployment benefits B. A sudden drop in the working age population (i.e. the retirement of the baby-boomer generation) C. A increase in the disutility of working D. Firms implementing a new monitoring device used to detect shirking

D. Firms implementing a new monitoring device used to detect shirking

All of the following were considered to be contributing factors to the Great Depression except: A. The banking crisis B. Deflation C. The stock market crash of 1929 D. Housing price bubble

D. Housing price bubble

This unit suggests that there have been three distinctive periods ('epochs') in capitalist economies since 1914. Which of the following Is not one of those periods? A. The great moderation. B. The golden age of capitalism. C. The roaring twenties and the Great Depression. D. The Second World War.

D. The Second World War

You are given the following information for a country: Participation rate is 75%, the unemployment rate is 10%, the employment rate is 67.5%, and the number of employed is 27 million. Based on this information, which of the following is correct? A. The unemployment rate is 12%. B. The working age population is 30 million C. The size of the labor force is 40 million D. The number of unemployed is 3 million

D. The number of unemployed is 3 million

The wage-setting curve shows that at relatively low levels of unemployment, economy-wide real wages will be relatively: a. Low b. High

Low: At low levels of unemployment, real wages will be relatively high High: At low levels of unemployment, real wages will be relatively high

The figure describes the effect of immigration on unemployment in the labor market.The labor market equilibrium is at A before the influx of immigration, then moves to C after the influx of immigration. Based on this figure, which of the following statements is correct? a. All incumbent workers are unaffected while the labor market adjusts b. All incumbent workers are no worse off in the new equilibrium. c. The unemployment rate is unchanged in the new equilibrium. d. Firms claim a higher markup in the new equilibrium.

b. All incumbent workers are no worse off in the new equilibrium.

Figure 17.26 depicts the US aggregate demand between 2006 Q2 and 2010 Q4.Based on this information, which of the following statements is correct? A. In the recession, not only did households stop purchasing new houses and other consumption goods, but also firms stopped investing. B. Government consumption and investment have been supporting economic growth throughout the period considered. C. Household consumption and residential investment recovered promptly since the end of the crisis. D. The fall in residential investment was the sole cause of the financial crisis.

A. In the recession, not only did households stop purchasing new houses and other consumption goods, but also firms stopped investing.

Which of the following was NOT a policy reform used in the US to deal with the stagflation of the 1970s? A. Increasing government expenditures B. Cutting unemployment benefits C. Reducing union power D. Restrictive monetary policy

A. Increasing government expenditures

Which statement is true regarding The Gold Standard monetary system? A. It is a product of Roosevelt's New Deal B. It adopted a fixed exchange rate in which the dollar has a specific gold value. C. It was abandoned in the Reagan era D. UK authorities promised to exchange the money for a fixed quantity of gold.

A. It is a product of Roosevelt's New Deal

The real wage refers to A. the purchasing power of the workers or anyone who receives income B. wages calculated after deducting all taxes C. nominal wage minus the price level D. the actual take-home pay of the workers

A. the purchasing power of the workers or anyone who receives income

Which of the following statements about the wage-setting curve is correct? A. The wage-setting curve depicts the workers' reservation wage for different levels of economy-wide employment. B. At each point on the wage-setting curve, the workers are choosing their best response effort level given the real wage and unemployment rate. C. A lower unemployment rate shifts the wage-setting curve down. D. A higher unemployment rate shifts the wage-setting curve down.

B. At each point on the wage-setting curve, the workers are choosing their best response effort level given the real wage and unemployment rate.

The crisis that marked the end of the golden age is sometimes described as a supply-side phenomenon in contrast to the crisis of the 1930s, which was caused by inadequate demand. Which of the following did NOT contribute to problems on the supply side in the 1970s? A. A slowing of productivity growth. B. High levels of employment. C. The breakdown of the postwar accords, whereby workers and employers accepted their respective shares of productivity. D. A reduction in the rate of net investment.

B. High levels of employment.