Economics test 3

10%

If a country has a population of 300 million, 135 million employed and 15 million people looking for a job, then it's unemployment rate is....

Supply; left

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

The Phillips curve will shift to the left

If inflationary expectations decrease. The result will be a decrease in the rate of inflation even though the unemployment rate may not have changed. In this case......

Vertical

If the Phillips curve is __________ in the long run, there is no trade-off between inflation and unemployment in the long run

Equals expected inflation

If the economy is at potential output, actual inflation......

Unemployment is below the natural rate and wages will rise

If the economy is operating above potential GDP, then.....

Sustained inflation

If the economy is operating on the vertical part of the AS curve and the fed pursues a policy of stabilizing interest rates in the face of expansionary fiscal policy, the result will most likely be....

A reduction in interest rate, an increase in investment, and an increase in GDP

In 1993, the congress and the president raised taxes. At the same time, the fed was pursuing an expansionary monetary policy. The combination of these fiscal and monetary polices led to.....

Vertical, no effect

In the long run, if wages adjust fully to rising prices, the aggregate supply curve will be ______________ and the fiscal policy will have ____________ on output.

The long-run aggregate supply curve is vertical at potential output

In the long run, the Phillips curve will be vertical at the natural rate of unemployment if.....

Aggregate supply curve

The functioning of the labour market primarily affects the shape of the.....

The aggregate supply curve

The graph that shows the realtionship between the aggregate quantity of output supplied by all the firms in an economy and the overall price level is....

Those people who are looking for a job

The labour force includes those people with a job and....

Is vertical because all prices (both input and output prices) change at the same rate in the long run

The long run aggregate supply curve....

IS curve to the left; Fed rule to the right

A decrease in government spending shifts the _______________, and a decrease in the price level shifts the ______________.

Left; right

A decrease in government spending shifts the aggregate demand curve to the ___________ and a decrease in the Z factors shifts the aggregate demand curve to the __________.

Demand-pull; higher

A rightward shift in the aggregate demand curve generates a ____________ inflation and ___________output

Left; smaller

A sudden increase in oil prices results in a supply shock, shifting the short run aggregate supply curve to the ____________, resulting in society getting a ____________ aggregate output at any price level.

Cost-push;lower

A sudden increase in the price of oil causes a __________ inflation and __________ output.

Frictional and structural unemployment

According to advocates of the long run vertical Philips curve, the natural rate of unemployment is determined by......

False

According to sticky wage theory, wages are just as likely to be stuck in the upward direction as they are in the downward direction. True or false

Relative-wage

According to the ___________ explanation of unemployment, workers will be willing to accept wage cuts only if that workers in others firms and industries are receiving similar cuts

Some workers will work for a lower wage and other will exit the labor market

According to the classical view of the labor market, if there is an excess supply of labor.....

Increases consumers expenditures due to an increase in the purchasing power of household wealth

According to the real wage effect (or real balance effect), a decrease in the price level.....

Higher; lower

All else equals, a cost shock that shifts the aggregate supply curve to the left leads to a ___________ price level and a ___________ level of aggregate output if the aggregate demand curve is downward sloping.

An increase in the overall prive level but little to no increase in output

An increase in aggregate demand when the economy is operating at high levels of output is likely to result in....

IS curve, right

An increase in government spending shift the ____________ to the ______________.

Fed rule, left

An increase in the price level shifts the ___________ to the ___________.

An implicit or social contract

An unspoken agreement between workers and firms that the firm will not cut wages is known as....

An increase in government spending

As a result of _______________, the equilibrium interest rate increases and the equilibrium output level increases.

In the short run, input prices practically wage rates are slower to adjust to increasing aggregate demand than are output prices

As shown in an AS curve diagram, the short run aggregate supply curve (AS) is upward sloping. This positive slope is explained in part by the fact that.....

Labor demand will decrease, the real wage will fall, and there will be no unemployment

Assume the classical view of the labor market. During a recession,.....

Labor

Changes in the _________ market affect the shape of the short run aggregate supply curve

Higher; lower

Demand pull inflation corresponds to __________ output and cost push inflation corresponds to __________ output.

Efficiency wage theory

Empirical studies of labor markets have identified several benefits firms receive from paying workers more than the market clearing wage. These studied tend to support the....

Increase, have no effect on

Expansionary fiscal policy and contractionary monetary policy will _____________ the interest rate and _______________ aggregate output.

Causes the Phillips curves to shift to the right

Expansionary monetary policy has people concerned about future inflation, which causes an increase in expected inflation. This will......

Goods

Fiscal policy affects the ________ market through changes in taxes and government spending

True

One explanation for the downwardly sticky wages is that the firms enter into social, or implicit contracts with worker not to cut wages. True or false

Increase;increase

Other things equal, a decrease in the Z factor will ___________ the equilibrium price level and _____________ equilibrium output

A small increase in aggregate output relative to the price level increase

Suppose a government implements expansionary macroeconomic policies at a time when the economy is approaching full capacity. In this case, such policies will result in......

A small price increase relative to the output increase

Suppose the economy s initially operating well below capacity. In this case, an expansionary macroeconomic policy will result in.....

Unemployment increases

Suppose the wage rate in the labor market is $15 and the demand for labor decreases. If the wages are sticky,.....

True

The Fed rule is an equation that shows how the interest rate behaviour of the Fed depends on the state of the economy. True or false

True

The IS curve shows the relationship between output and the interest rate. True or false

Inflation and unemployment, negatively

The Phillips curve models the relationship between ____________ and ______________. It asserts that these variables are _____________ correlated.

Negative; price level; demanded

The aggregate demand curve shows a ____________ relationship between ___________ and aggregate output _____________.

An increase in the price level causes the demand for money to rise, driving up the interest rate and discouraging investment which causes the aggregate demand to fall

The aggregate demand curve slopes downward because....

Real wealth affect

The change in consumption brought about by a change in purchasing power of savings that results from a change in the price level is the....

Requires knowledge regarding the interaction between the goods market and the money market

The derivative of an economies aggregate demand (AD) curve.....

Unemployment rate

The number unemployed divided by the labour force is the.....

Structural unemployment

The type of unemployment that is most likely to arise as a result of technological changes is.....

False

There is a positive relationship between the overall price level and the aggregate output in the goods market with the Fed rule, and this relationship is the aggregate demand curve. True or false

Increase government spending and discourage technological advancemnet

To increase the price level the government could....

The price level rises, inventories decline, firms respond by increasing output and employment

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

True

When the AD curve is vertical and a cost shock shifts the AS curve to the left, there is no change in output. True or false

Vertical

When the economy is producing at full capacity, the aggregate supply curve becomes....

Up; higher

When the interest rate falls, the planned aggregate expenditure curve shifts __________ because planned investment is ____________.

AE=C+I+G

Which of the following equations represents equilibrium in the goods market?

To abide by minimum wage laws

Which of the following is not a reason why firms pay efficiency wages?

True

Workers in one industry may be unwilling to accept a pay decrease because they are concerned that their wage will fall relative to workers in other industries. True or false

Cyclical unemployment

You are laid off from your job because of a general downturn in economic activity. This is an example of....