Intermed Macro Multiple Choice Questions

The average amount of time people spend unemployed in the U.S. is approximately A) 1 month. B) 6 months. C) 12 months. D) none of these

D) none of these

For this question, assume that the Phillips curve equation is represented by the following equation:𝜋𝑡 − 𝜋𝑡−1 = (𝑚 + 𝑧) − 𝛼𝑢𝑡.Given this information, the natural rate of unemployment will be equal to A) 𝑚 + 𝑧. B) (𝑚 + 𝑧 − 𝛼). C) 𝛼(𝑚 + 𝑧). D) 0. E) none of these

E) none of these

Today, about ________ of U.S. workers have their wages set by collective bargaining agreements. A) 10% B) 15% C) 20% D) 25%

A) 10%

Suppose the aggregate production function is given by the following: Y = AN. Given this information, we know that labor productivity is represented by which of the following? A) 1/A B) A C) 1/N D) N/Y

B) A

Which of the following assumptions best characterized the assumption about how individuals formed expectations of inflation by the early 1970s? A) Expected inflation for the current year was smaller than the previous year's inflation rate. B) Expected inflation for the current year was approximately equal to the previous year's inflation rate. C) Expected inflation for the current year was less than the previous year's inflation rate. D) Expected inflation for the current year equal to the average inflation rate over the past five years. E) Expected inflation for the current year equal to the average inflation rate over the past ten years

B) Expected inflation for the current year was approximately equal to the previous year's inflation rate.

Which of the following individuals first discovered the relationship between unemployment and inflation for the United States? A) Solow and Friedman B) Samuelson and Solow C) Friedman and Phillips D) Friedman and Phelps

B) Samuelson and Solow

Which of the following variables is most directly determined in the labor market? A) stock prices B) nominal wages C) interest rates D) all of these E) none of these

B) nominal wages

When the unemployment rate is low, we would expect that A) the probability of losing a job is high. B) the probability of losing a job is low. C) the probability an unemployed individual will find another job is low. D) the separation rate will increase

B) the probability of losing a job is low.

Since approximately 1970, the most stable Phillips-type relationship for the United States has been between which of the following? A) the rate of inflation and the change in the unemployment rate B) the unemployment rate and the change in the rate of inflation C) the change in the unemployment rate and the change in the rate of inflation D) the inverse of the unemployment rate and the rate of inflation E) the unemployment rate and the rate of inflation

B) the unemployment rate and the change in the rate of inflation

The price setting equation is represented by the following: P = (1 + m)W. When there is perfect competition, we know that m willequal A) W. B) 1. C) 0. D) W/P. E) none of these

C) 0.

As the unemployment rate falls, A) the proportion of the unemployed finding a job decreases. B) the separation rate increases. C) the young and unskilled experience larger-than-average decreases in unemployment. D) the separation rate decreases

C) the young and unskilled experience larger-than-average decreases in unemployment.

In the wage-setting relation, the nominal wage tends to decrease when A) the price level increases. B) the unemployment rate decreases. C) unemployment benefits decrease. D) the minimum wage increases. E) all of these

C) unemployment benefits decrease.

If efficiency wage theory is valid, we would expect a relatively low premium over the reservation wage when A) the unemployment rate is low. B) the job requires very little training. C) workers can be easily monitored. D) workers have few other options for employment in the area. E) all of these

C) workers can be easily monitored.

Suppose the aggregate production function is given by the following: Y = N. Given this information, we know that labor productivity is represented by which of the following? A) 1/N B) N C) N/Y D) 1

D) 1

In which of the following periods was the relationship between the U.S. unemployment rate and U.S. inflation rate unstable? A) 1901 to 1909 B) 1911 to 1919 C) 1921 to 1929 D) 1931 to 1939 E) none of these

D) 1931 to 1939

Which of the following individuals first discovered the relationship between unemployment and inflation? A) Solow B) Samuelson C) Friedman D) Phillips

D) Phillips

For this question, assume that the Phillips curve equation is represented by the following equation:𝜋𝑡 − 𝜋𝑡−1 = (𝑚 + 𝑧) − 𝛼𝑢𝑡.A reduction in the unemployment rate will cause A) a reduction in the markup over labor costs (i.e., a reduction in m). B) an increase in the markup over labor costs. C) an increase in the inflation rate over time. D) a decrease in the inflation rate over time. E) none of these

D) a decrease in the inflation rate over time.

Which of the following will tend to occur as a result of a reduction in the proportion of a country's workers who have indexed wages? A) the unemployment rate will be relatively low B) the unemployment rate will be relatively high C) the inflation rate will be relatively low D) a given change in the unemployment rate will cause a relatively smaller change in the inflation rate E) none of these

D) a given change in the unemployment rate will cause a relatively smaller change in the inflation rate.

Suppose the actual unemployment rate increases. This will cause 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 movement along the WS and the PS curves. E) none of these

D) a movement along the WS and the PS curves.

An increase in the price of oil will likely cause which of the following? A) increase the markup in the Phillips curve equation B) increase the sum "m + z" in the Phillips curve equation C) increase the natural rate of unemployment D) all of these E) none of these

D) all of these

In the Phillips curve equation, which of the following will cause an increase in the current inflation rate? A) an increase in the expected inflation rate B) a reduction in the unemployment rate C) an increase in the markup, m D) all of these E) none of these

D) all of these

For this question, assume that the Phillips curve equation is represented by the following: 𝜋𝑡 − 𝜋𝑡−1 = (𝑚 + 𝑧) − 𝛼𝑢𝑡.Which of the following will not cause an increase in the natural rate of unemployment? A) a reduction in m B) a reduction in z C) an increase in α D) an increase in the expected rate of inflation E) all of these

D) an increase in the expected rate of inflation

In which of the following decades did the Phillips curve breakdown for the U.S.? A) 1940s B) 1950s C) 1960s D) none of these

D) none of these

Assume that expected inflation is based on the following: 𝜋𝑡𝑒 = 𝜃𝜋𝑡−1. If 𝜃 = 0, we know that A) a reduction in the unemployment rate will have no effect on inflation. B) low rates of unemployment will cause steadily increasing rates of inflation. C) high rates of unemployment will cause steadily declining rates of inflation. D) the Phillips curve illustrates the relationship between the level of inflation rate and the level of the unemployment rate

D) the Phillips curve illustrates the relationship between the level of inflation rate and the level of the unemployment rate

When the Current Population Survey (CPS) was introduced in 1940, it was based on a survey of approximately 8,000 households.The CPS survey is now based on a survey of how many households? A) 8,000 B) 10,000 C) 12,000 D) 20,000 E) 60,000

E) 60,000

Data on labor-force flows show that A) in any given month, almost none of the unemployed gets jobs. B) in any given month, almost all of the unemployed gets jobs. C) the average duration of unemployment is about 2 weeks. D) the average duration of unemployment is about 2 years. E) in any given month, about one-fourth of the unemployed get jobs

E) in any given month, about one-fourth of the unemployed get jobs

When inflation has been persistent, as was the case in the United States during the 1970s, low unemployment rates will likely be associated with A) low natural rates of unemployment. B) high natural rates of unemployment. C) low but stable rates of inflation. D) high but stable rates of inflation. E) increases in the inflation rate

E) increases in the inflation rate

Which of the following individuals would be considered unemployed? A) an individual who works only part-time B) an individual who works full-time in a family business, but is not paid C) an individual who is not working and is not looking for work D) all of these E) none of these

E) none of these

Which of the following is considered out of the labor force? A) the unemployed B) those temporarily laid off who will soon be recalled C) those who worked full-time, but in a family business D) those individuals who have started searching for employment for the first time E) none of these

E) none of these

Which of the following is one possible explanation for the change in the natural rate of unemployment in the United States during the 1970s? A) contractionary fiscal policy B) an increase in the proportion of labor contracts that were indexed C) contractionary monetary policy D) all of these E) none of these

E) none of these

Which of the following will most likely cause a change in the natural rate of unemployment? A) changes in monetary policy B) changes in fiscal policy C) changes in expected inflation D) all of these E) none of these

E) none of these

Based on our understanding of the labor market model presented in Chapter 7, 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 rate of unemployment. D) a reduction in the natural rate of unemployment and no change in the real wage

A) an increase in the equilibrium real wage.

Based on our understanding of the labor market model presented in Chapter 7, we know that an increase in the minimum wage will cause A) an increase in the equilibrium real wage. B) a reduction in the equilibrium real wage. C) a reduction in the natural rate of unemployment. D) a reduction in the equilibrium real wage and natural rate of unemployment

A) an increase in the equilibrium real wage.

For this question, assume that Y = N. Based on our understanding of the labor market model presented in Chapter 7, we know that a reduction in the markup will cause A) an increase in the natural level of output. B) a reduction in the natural level of output. C) no change in the natural level of output. D) a reduction in the natural level of employment

A) an increase in the natural level of output

An increase in the minimum wage will tend to cause 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 these

A) an upward shift in the WS curve

For this question, assume that individuals form expectations of inflation according to the following equation 𝜋𝑡𝑒 = 𝜃𝜋𝑡−1. From 1970 on, the value of θ for this equation A) increased over time and approached 1. B) decreased over time and approached zero. C) remained constant at zero. D) remained constant at negative one. E) none of these

A) increased over time and approached 1.

Based on price-setting behavior, we know that a reduction in the unemployment rate will cause A) no change in the real wage. B) a reduction in the real wage. C) an increase in the real wage. D) an upward shift of the PS curve

A) no change in the real wage.

Based on price-setting behavior, we know that an increase in the unemployment rate will cause A) no change in the real wage. B) a reduction in the real wage. C) an increase in the real wage. D) an upward shift of the PS curve

A) no change in the real wage.

With the real wage on the vertical axis and employment (N) on the horizontal axis, we know that A) the WS curve is upward sloping. B) the WS curve is downward sloping. C) the PS curve is upward sloping. D) the PS curve is downward sloping

A) the WS curve is upward sloping.

Labor productivity is represented by which of the following? A) the ratio of output to employment B) workers per unit of capital C) capital per worker D) the ratio of output to population E) the ratio of output to the labor force

A) the ratio of output to employment

The labor force is defined as A) the sum of the employed and unemployed. B) the total number employed. C) the total number of working-age individuals in the population. D) the sum of the number of employed, unemployed, and discouraged individuals.

A) the sum of the employed and unemployed.

A reduction in the minimum wage will tend to cause 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 these

B) a downward shift in the WS curve

A reduction in unemployment benefits will tend to cause 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 these

B) a downward shift in the WS curve

Suppose we wish to examine the determinants of the equilibrium real wage and equilibrium level of employment (N). In a graph with the real wage on the vertical axis, and the level of employment on the horizontal axis, the price-setting relation will now be A) a vertical line. B) a horizontal line. C) an upward sloping line. D) a downward sloping line. E) kinked at the natural rate of unemployment.

B) a horizontal line.

Based on our understanding of the labor market model presented in Chapter 7, we know that an increase in the markup will cause A) an increase in the equilibrium real wage. B) a reduction in the equilibrium real wage. C) a reduction in the natural rate of unemployment. D) a reduction in the equilibrium real wage and natural rate of unemployment

B) a reduction in the equilibrium real wage.

For this question, assume that Y = N. Based on our understanding of the labor market model presented in Chapter 7, we know that an increase in the minimum wage will cause A) an increase in the natural level of output. B) a reduction in the natural level of output. C) no change in the natural level of output. D) an increase in the natural level of employment.

B) a reduction in the natural level of output.

Based on wage-setting behavior, we know that an increase in the unemployment rate will cause A) no change in the real wage. B) a reduction in the real wage. C) an increase in the real wage. D) an upward shift of the WS curve.

B) a reduction in the real wage.

The natural level of employment (N) will increase when which of the following occurs? A) an increase in the markup of prices over costs B) a reduction in unemployment benefits C) an increase in the actual unemployment rate D) all of these E) none of these

B) a reduction in unemployment benefits

Use the following Phillips curve equation to answer this question: 𝜋𝑡 − 𝜋𝑡−1 = (𝑚 + 𝑧) − 𝛼𝑢𝑡.Which of the following will cause an increase in the natural rate of unemployment? A) a reduction in m B) an increase in z C) an increase in α D) a reduction in expected inflation E) none of these

B) an increase in z

In the United States, the average length of time people spend unemployed is A) approximately one month. B) between two and three months. C) between ten and eleven months. D) greater than twelve months

B) between two and three months.

Which of the following statements about wage setting is true? A) most workers in the U.S. have their wages set by formal contracts. B) formal contracts play a more important role in Japan and Western Europe than in the United States. C) the minimum wage in the U.S. is about 75% of the average wage. D) all of these

B) formal contracts play a more important role in Japan and Western Europe than in the United States.

Assume that expected inflation is based on the following: 𝜋𝑡𝑒 = 𝜃𝜋𝑡−1. If 𝜃 =1, we know that A) a reduction in the unemployment rate will have no effect on inflation. B) low rates of unemployment will cause steadily increasing rates of inflation. C) the actual unemployment rate will not deviate from the natural rate of unemployment. D) the Phillips curve illustrates the relationship between the level of inflation rate and the level of the unemployment rate

B) low rates of unemployment will cause steadily increasing rates of inflation.

Efficiency wage theory suggests that A) workers will be paid less than their reservation wage. B) productivity might drop if the wage rate is too low. C) the government can only set tax rates so high before people will prefer not to work. D) unskilled workers will have a lower turnover rate than skilled workers. E) firms will be more resistant to wage increases as the labor market tightens.

B) productivity might drop if the wage rate is too low.

With the real wage on the vertical axis and the unemployment rate on the horizontal axis, we know that A) the WS curve is upward-sloping. B) the WS curve is downward sloping. C) the PS curve is upward-sloping. D) the PS curve is downward sloping.

B) the WS curve is downward sloping.

The natural level of output is the level of output that occurs when A) the goods market and financial markets are in equilibrium B) the economy is operating at an unemployment rate consistent with both the wage-setting and price-setting equations C) the markup (m) is zero. D) the unemployment rate is zero. E) there are no discouraged workers in the economy

B) the economy is operating at an unemployment rate consistent with both the wage-setting and price-setting equations

Suppose workers and firms expect the overall price level to increase by 5%. Given this information, we would expect that A) the nominal wage will increase by less than 5%. B) the nominal wage will increase by exactly 5%. C) the nominal wage will increase by more than 5%. D) the real wage will increase by 5%. E) the real wage will increase by less than 5%

B) the nominal wage will increase by exactly 5%.

The non-institutional civilian population is 250 million, of which 100 million are employed and 10 million are unemployed. Based on the information above, the labor force participation rate is A) 36%. B) 40% C) 44%. D) 90.1%. E) 66%.

C) 44%

In the United States, how many workers become unemployed, on average, every day? A) 5,000 B) 10,000 C) 50,000 D) 100,000

C) 50,000

The Current Population Survey interviews approximately how many households each month? A) 5,000 B) 10,000 C) 60,000 D) 100,000

C) 60,000

The participation rate in the United States in 2018 was approximately equal to A) 96%. B) 90%. C) 62%. D) 26%. E) 5%.

C) 62%.

The non-institutional civilian population is 250 million, of which 100 million are employed and 10 million are unemployed. Based on the information above, the unemployment rate is A) 4%. B) 6.6%. C) 9.1%. D) 10%. E) 11.1%

C) 9.1%

A reduction in the unemployment rate will tend to cause which of the following? A) an increase in the separation rate B) a reduction in the nominal wage C) a reduction in the duration that one is employed D) none of these

C) a reduction in the duration that one is employed

Henry Ford's experiment with efficiency wages resulted in A) a dramatic drop in productivity. B) a dramatic increase in the turnover rate. C) a reduction in the layoff rate. D) new problems with the work force, like drunkenness and reckless driving. E) no noticeable effects

C) a reduction in the layoff rate.

Which of the following will not cause an increase in the natural rate of unemployment? A) an increase in m B) an increase in z C) an increase in the expected inflation rate D) a reduction in m E) none of these

C) an increase in the expected inflation rate

Based on wage-setting behavior, we know that a reduction in the unemployment rate will cause A) no change in the real wage. B) a reduction in the real wage. C) an increase in the real wage. D) an upward shift of the WS curve

C) an increase in the real wage.

For this question, assume that the Phillips curve equation is represented by the following: 𝜋𝑡 − 𝜋𝑡−1 = (𝑚 + 𝑧) − 𝛼𝑢𝑡.Which of the following will cause a reduction in the natural rate of unemployment? A) an increase in m B) an increase in z C) an increase in α D) an increase in actual inflation E) an increase in expected inflation

C) an increase in α

Suppose that increased international trade makes product markets more competitive in the U.S. Given this information, we would 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 these

C) an upward shift in the PS curve

An increase in unemployment benefits will tend to cause which of the following? A) a downward shift in the WS curve B) an upward shift in the PS curve C) an upward shift in the WS curve D) a downward shift in the PS curve E) none of these

C) an upward shift in the WS curve

Suppose we wish to examine the determinants of the equilibrium real wage and equilibrium level of employment (N). In a graph with the real wage on the vertical axis, and the level of employment on the horizontal axis, the wage-setting relation will now be A) a vertical line. B) a horizontal line. C) an upward sloping line. D) a downward sloping line. E) a curve that first slopes upward, then downward.

C) an upward sloping line.

The evidence for the U.S. suggests that the natural rate of unemployment has A) increased by more than 5% since the 1960s. B) increased by 1 to 2% since the 1960s. C) decreased from 2000-2007, lower than it had been in the 1980s. D) decreased by more than 5% since the 1960s. E) fluctuated over time since the 1960s

C) decreased from 2000-2007, lower than it had been in the 1980s.

Based on the data provided in the chapter, which of the following represents the largest component of the labor force? A) discouraged workers B) retired individuals C) employed D) unemployed

C) employed

Assume that expected inflation is based on the following: 𝜋𝑡𝑒 = 𝜃𝜋𝑡−1. An increase in θ will cause A) an increase in the natural rate of unemployment. B) a reduction in the natural rate of unemployment. C) no change in the natural rate of unemployment. D) inflation in period t to be more responsive to changes in unemployment in period t.

C) no change in the natural rate of unemployment.

In the wage setting relation W = PeF(u,z), the variable z does not include which of the following variables? A) the minimum wage B) unemployment benefits C) the extent to which firms mark up prices over their marginal cost D) all of these E) none of these

C) the extent to which firms mark up prices over their marginal cost

Which of the following represents the participation rate? A) the ratio of the number employed to the size of the labor force B) the ratio of the number employed to the civilian noninstitutional population C) the ratio of the labor force to the civilian noninstitutional population D) the ratio of the labor force to the total number of employed and unemployed workers

C) the ratio of the labor force to the civilian noninstitutional population

When inflation has not been very persistent, as was the case in the United States before the mid-1960s, we can expect that A) the expected price level for a given year will equal the previous year's actual price level. B) the current inflation rate will not depend heavily on past years' inflation rates. C) lower unemployment rates will be associated with higher inflation rates. D) all of these E) none of these

D) all of these

For this question, assume that the expected rate of inflation is a function of the past year's inflation. Also, assume that the unemployment rate has been greater than the natural rate of unemployment for a number of years. Given this information, we know that A) the rate of inflation will approximately be equal to zero. B) the rate of inflation should neither increase nor decrease. C) the rate of inflation should steadily increase over time. D) the rate of inflation should steadily decrease. E) the inflation rate will be approximately equal to the natural rate of unemployment

D) the rate of inflation should steadily decrease.

Data on labor-force flows show that A) almost all separations are due to death. B) almost all separations are due to serious illness. C) almost all separations are quits. D) almost all separations are layoffs. E) none of these

E) none of these

Since 1970, the evidence for the U.S. suggests that the average rate of unemployment required to keep inflation constant has been A) between 1% and 2%. B) between 2% and 3%. C) between 3% and 4%. D) between 9% and 10%. E) none of these

E) none of these

Suppose the actual unemployment rate decreases. This will cause 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 these

E) none of these

The natural rate of unemployment is the rate of unemployment A) that occurs when the money market is in equilibrium. B) that occurs when the markup of prices over costs is zero. C) where the markup of prices over costs is equal to its historical value. D) that occurs when both the goods and financial markets are in equilibrium. E) none of these

E) none of these

The original Phillips curve implied or assumed that A) the markup over labor costs was zero. B) the expected rate of inflation would be zero. C) the actual and expected rates of inflation would always be equal. D) all of these E) none of these

E) none of these

The reservation wage is A) the wage that an employer must pay workers to reduce turnover to a reasonable level. B) the wage that ensures a laid-off individual will wait for re-hire, rather than find another job. C) the lowest-wage firms are allowed by law to pay workers. D) the wage offer that will end a labor-strike. E) none of these

E) none of these

The two labor markets in the "dual labor market" are A) southern versus northern. B) western versus eastern. C) English speaking versus non-English speaking. D) domestic versus foreign. E) none of these

E) none of these

When a worker's nominal wage is indexed, the nominal wage is usually automatically adjusted based on movements in which ofthe following variables? A) productivity B) the price of the firm's product C) the average wage in the country D) the average wage in the industry E) none of these

E) none of these