MacroEcon

In the case of unions, the conflict of interest between different groups of workers results in insiders wanting ______, while outsiders want ______. a. more hirings; high wages b. high wages; more hirings c. high wages; fewer hirings d. fewer hirings; high wages

b. high wages; more hirings

The costs of unexpected inflation, but not of expected inflation, are: a. menu costs. b. the arbitrary redistribution of wealth between debtors and creditors. c. unintended distortions of individual tax liabilities. d. the costs of relative price variability.

b. the arbitrary redistribution of wealth between debtors and creditors

Along an aggregate demand curve, which of the following are held constant? a. real output and prices b. nominal output and velocity c. the money supply and real output d. the money supply and velocity

d. the money supply and velocity

In the model of the steady-state unemployment rate with a fixed labor force, the rate of job finding equals the percentage of the ______ who find a job each month, while the rate of job separation equals the percentage of the ______ who lose their job each month. a. labor force; labor force b. labor force; unemployed c. employed; labor force d. unemployed; employed

d. unemployed; employed

An event that shifts the aggregate demand curve is known as a:

demand shock

Many countries in Europe have more generous unemployment-insurance benefits than the United States. These countries are MOST likely to have a _____ natural rate of unemployment and _____ income security for workers than in the United States.

higher ; more

If a computer glitch at credit card companies makes stores start accepting only cash payments, the demand for money will _______.

increase

Since 1985, the United States has become _____ susceptible to negative oil price shocks because of _____.

less; a shift from manufacturing to services production

_____ refers to the combination of inflation and falling output.

stagflation

Which of the following changes would contribute to a decline in the index of leading indicators, suggesting that a recession is more likely?

a decline in the slope of the yield curve

Stabilization policy refers to policy actions aimed at: a. reducing the severity of short-run economic fluctuations. b. equalizing incomes of households in the economy. c. maintaining constant shares of output going to labor and capital. d. preventing increases in the poverty rate

a. reducing the severity of short-run economic fluctuations.

Stagflation—lower output and higher prices—is caused by

an adverse shock to aggregate supply.

According to some economists, _____ is a more effective tool than the minimum wage for raising the income of the working poor.

an earned income tax credit

is caused by the time that workers spend in job search.

Frictional Unemployment

Government revenues raised by printing money

Seigniorage

Efficiency-wage theories suggest that a firm may pay workers more than the market-clearing wage for all of the following reasons except to: a. reduce labor turnover. b. improve the quality of the firm's labor force. c. increase worker effort. d. reduce the firm's wage bill.

d. reduce the firm's wage bill.

The unemployment resulting when real wages are held above equilibrium is called ______ unemployment, while the unemployment that occurs as workers search for a job that best suits their skills is called ______ unemployment. a. efficiency; inefficiency b. efficiency; structural c. frictional; efficiency d. structural; frictional

d. structural; frictional

In a typical recession, consumption ________

falls

The aggregate demand curve shows the relationship between the price level and the quantity of _____ demanded.

goods and services

The _____ is the total of all people, employed and unemployed.

labor force

_____ unemployment exists when there are more people seeking jobs in a labor market than there are jobs available at the current wage.

structural

In 2017, which country had the lowest percentage of workers covered by collective bargaining?

turkey

An expansion in aggregate demand increases __________ in the short run. In the long run, however, it increases only the ________

real GDP ; price level

An economic situation that is characterized by a drop in output, rising unemployment rates, and an increase in inflation is called:

stagflation

If wages are _____, then they are slow to fall even in the face of relatively high unemployment and slow to rise even in the face of labor shortages.

sticky

Prices that adjust infrequently are described as _____ prices.

sticky

When the actual real wage is higher than the equilibrium real wage, the quantity of labor demanded is less than the quantity of labor supplied. In this case, there MOST likely will be _____ unemployment.

structural

In response to falling demand for unskilled labor in the United States, _____ have/has fallen substantially.

the real wages of unskilled workers

Appropriate public policy:

can reduce, but not completely abolish, frictional unemployment.

According to the text, an optimal unemployment insurance scheme balances the _____ with the benefit of providing income security to workers.

cost of a higher natural rate of unemployment

_____ refers to the tendency of people to behave inappropriately when their behavior is imperfectly monitored.

moral hazard

Investment moves in the same direction as consumption but proportionately _______

more

The average growth rate of real gross domestic product for the United States from 1970 to 2017 was about _____ percent.

3

In the United States, a minimum wage has been set at about _____ percent of manufacturing wages and was first introduced in 1938.

30 to 50

Between 1970 and 2017, the official unemployment rate in the United States fluctuated between:

4 percent and 11 percent

The opportunity cost of holding money is the: a. nominal interest rate. b. real interest rate. c. federal funds rate. d. prevailing Treasury bill rate.

a. nominal interest rate.

In contrast to unemployment insurance benefits, governmental job training programs and assistance in job search are considered _____ labor market policies.

active

The inflation tax is paid: a. only by the central bank. b. by all holders of money. c. only by government bond holders. d. equally by every household.

b. by all holders of money.

Hyperinflations ultimately are the result of excessive growth rates of the money supply; the underlying motive for the excessive money growth rates is frequently a government's: a. desire to increase prices throughout the economy. b. need to generate revenue to pay for spending. c. responsibility to increase nominal interest rates by increasing expected inflation. d. inability to buy government securities through open-market operations.

b. need to generate revenue to pay for spending.

The inconvenience associated with reducing money holdings to avoid the inflation tax is called: a. menu costs. b. shoeleather costs. c. variable yardstick costs. d. fixed costs.

b. shoeleather costs.

If the Fed responds to an adverse supply shock by expanding the money supply, it will

keep the economy closer to its natural levels of output and employment.

European countries exhibit ____ variations in their unemployment rates and _____ variations in labor market policies.

large ; large

If the money supply is held constant, then the aggregate demand curve will shift to the

left

If the steady-state rate of unemployment equals 0.125 and the fraction of unemployed workers who find jobs each month (the rate of job findings) is 0.56, then the fraction of employed workers who lose their jobs each month (the rate of job separations) must be: a. 0.08. b. 0.125. c. 0.22. d. 0.435.

a. 0.08.

Which of the following is an example of frictional unemployment? a. Dave searches for a new job after voluntarily moving to San Diego. b. Elaine is willing to work for less than the minimum wage, but employers cannot hire her for less than the minimum wage. c. Bill is qualified and would like to be an airline pilot, but airlines do not find it profitable to hire him at the wage established by the airline pilots' union. d. Joan is willing to work for less than the going wage, but there are no jobs available.

a. Dave searches for a new job after voluntarily moving to San Diego.

If the rate of separation is 0.03 and the rate of job finding is 0.09 but the current unemployment rate is 0.30, then the current unemployment rate is ______ the equilibrium rate, and in the next period it will move ______ the equilibrium rate. a. above; toward b. above; away from c. below; toward d. below; away from

a. above; toward

If nominal wages cannot be cut, then the only way to reduce real wages is by: a. adjustments via inflation. b. unions. c. legislation. d. productivity increases.

a. adjustments via inflation.

If Central Bank A cares only about keeping the price level stable and Central Bank B cares only about keeping output at its natural level, then in response to an exogenous decrease in the velocity of money: a. both Central Bank A and Central Bank B should increase the quantity of money. b. Central Bank A should increase the quantity of money, whereas Central Bank B should keep it stable. c. Central Bank A should keep the quantity of money stable, whereas Central Bank B should increase it. d. both Central Bank A and Central Bank B should keep the quantity of money stable.

a. both Central Bank A and Central Bank B should increase the quantity of money.

. In the aggregate demand-aggregate supply model, long-run equilibrium occurs at the combination of output and prices where: a. aggregate demand is greater than long-run aggregate supply. b. aggregate demand equals short-run aggregate supply. c. aggregate demand equals short-run and long-run aggregate supply. d. short-run aggregate supply equals long-run aggregate supply.

c. aggregate demand equals short-run and long-run aggregate supply.

Wage rigidity: a. forces labor demand to equal labor supply. b. is caused by sectoral shifts. c. prevents labor demand and labor supply from reaching the equilibrium level. d. increases the rate of job finding.

c. prevents labor demand and labor supply from reaching the equilibrium level.

The short-run aggregate supply curve is horizontal at: a. a level of output determined by aggregate demand. b. the natural level of output. c. the level of output at which the economy's resources are fully employed. d. a fixed price level.

d. a fixed price level.

The ex post real interest rate will be greater than the ex ante real interest rate when the: a. rate of inflation is increasing. b. rate of inflation is decreasing. c. actual rate of inflation is greater than the expected rate of inflation. d. actual rate of inflation is less than the expected rate of inflation

d. actual rate of inflation is less than the expected rate of inflation

The two main reasons for unemployment are:

the time it takes for workers to find jobs and the failure of wages to adjust to a level where labor demand equals labor supply.