Econ 102 Chapter 6

35) If real GDP is $800 million and aggregate labor hours are 20 million, labor productivity is ________. A) $160 per hour B) $40 per hour C) $16,000 million D) $40 million

B) $40 per hour

36) If real GDP is $13,000 billion and aggregate hours are 270 billion, labor productivity equals A) $45 per hour. B) $48 per hour. C) $650 per hour. D) $6.50 per hour.

B) $48 per hour

19) If the real wage rate is such that the quantity of labor supplied equals the quantity of labor demanded, A) a full-employment equilibrium occurs. B) actual GDP equals potential GDP. C) the supply curve of labor is vertical. D) Both answers A and B are correct.

D) Both answers A and B are correct.

9) The aggregate production function shows how ________ varies with ________. A) labor; leisure time B) labor; capital C) leisure time; labor D) real GDP; labor

D) real GDP; labor

45) If capital per worker rises, A) labor productivity increases. B) firms respond by raising their prices. C) labor productivity decreases. D) no technological progress occurs

A) labor productivity increases

29) The real wage rate will fall if the A) labor supply curve shifts rightward and the labor demand curve does not shift. B) labor demand curve shifts rightward more than the labor supply curve shifts rightward. C) labor supply curve shifts leftward and the labor demand curve does not shift. D) labor demand curve shifts rightward and the labor supply curve does not shift.

A) labor supply curve shifts rightward and the labor demand curve does not shift.

37) When labor productivity increases, the demand for labor curve ________ and the supply of labor curve ________. A) shifts rightward; does not shift B) shift s leftward; does not shift C) shifts rightward; shifts rightward D) shifts leftward; shifts rightward

A) shifts rightward; does not shift

5) Using the Rule of 70, if China's current growth rate of real GDP per person was 7 percent a year, how long would it take the country's real GDP per person to double? A) 14 years B) 10 years C) 35 years D) 49 years

B) 10 years

28) The tables above show the labor market and the production function schedule for the country of Pickett. An increase in population changes the labor supply by 20 billion hours at each real wage rate. Potential GDP ________. A) decreases to $3 trillion B) increases to $18 trillion C) does not change D) increases to $50 trillion

B) increases to $18 trillion

18) People base their labor supply on the ________ because they care about ________. A) money wage; a surplus of labor B) real wage; what their earnings will buy C) money wage; the amount of labor firms demand D) real wage; the equality of money wages and the price level

B) real wage; what their earnings will buy

11) The curvature of the production function shows that as employment increases, the productivity of labor A) remains constant. B) remains positive but decreases. C) remains positive and increases. D) decreases and becomes negative.

B) remains positive but decreases

4) Using the Rule of 70, if the country of Huttodom's current growth rate of real GDP per person was 10 percent a year, how long would it take the country's real GDP per person to double? A) 10 years B) 0.7 years C) 7 years D) 20 years

C) 7 years

10) An increase in labor hours will lead to A) neither a movement along nor a shift in the aggregate production function. B) both a movement along and a shift in the aggregate production function. C) a movement along the aggregate production function but no shift in it. D) a shift of the aggregate production function but no movement along it.

C) a movement along the aggregate production function but no shift in it

26) Full employment corresponds to A) being at the point where the marginal product of labor equals zero. B) labor demand being greater than labor supply and actual GDP being equal to potential GDP. C) equilibrium in the labor market, with actual GDP being equal to potential GDP. D) equilibrium in the labor market, and actual GDP exceeding potential GDP.

C) equilibrium in the labor market, with actual GDP being equal to potential GDP.

32) Potential GDP per labor hour can increase due to A) decreases in the quantity of capital. B) increases in population. C) increases in labor productivity. D) increases in the quantity of money.

C) increases in labor productivity

41) As a result of the rightward shift in the demand curve for labor from LD0 to LD1, the equilibrium level of employment ________ and potential GDP ________. A) increases; decreases B) decreases; decreases C) increases; increases D) decreases; increases

C) increases; increases

23) In the above figure, at the real wage rate of $50 A) there is shortage of 20 billion hours per year. B) there is a surplus of 100 billion hours per year. C) there is a surplus of 60 billion hours per year. D) there is a shortage of 100 billion hours per year.

C) there is a surplus of 60 billion hours per year

7) In 2011, Armenia had a real GDP of approximately $4.21 billion and a population of 2.98 million. In 2012, real GDP was $4.59 billion and population was 2.97 million. Armenia's real GDP per person in 2012 was A) $132 B) $1,413 C) $380 D) $1,545

D) $1,545

6) Suppose a nation's population grows by 2 percent and, at the same time, its GDP grows by 5 percent. Approximately how fast will real GDP per person increase? A) 5 percent per year B) 2 percent per year C) 10 percent per year D) 3 percent per year

D) 3 percent per year

3) In 2011, Armenia had a real GDP of $4.21 billion and a population of 2.98 million. In 2012, real GDP was $4.59 billion and population was 2.97 million. What was Armenia's economic growth rate from 2011 to 2012? A) 8.3 percent B) 0.38 percent C) 3.8 percent D) 9.0 percent

D) 9.0 percent

1) The best definition for economic growth is A) a sustained expansion of production possibilities measured as the increase in real GDP over a given period. B) a sustained expansion of consumption goods over a given period. C) a sustained expansion of production possibilities measured as the increase in nominal GDP over a given period. D) a sustained expansion of production goods over a given period.

A) a sustained expansion of production possibilities measured as the increase in real GDP over a given period.

13) The country of Kemper is on its aggregate production function at point W in the above figure. If the population increases with no change in capital or technology, the economy will A) move to point such as X. B) move to point such as Y. C) remain at point W. D) move to point such as Z.

A) move to point such as X.

12) The country of Kemper is on its aggregate production function at point W in the above figure. The government of Kemper passes a law that makes 4 years of college mandatory for all citizens. After all citizens have their education, the economy will A) move to point such as Z. B) remain at point W. C) move to point such as X. D) move to point such as Y.

A) move to point such as Z.

47) If capital per hour of labor decreases, real GDP per hour of labor A) increases because the level of technology increases. B) decreases for a given level of technology. C) decreases because the level of technology decreases. D) increases for a given level of technology.

B) decreases for a given level of technology.

17) The labor demand curve slopes downward because A) the firm maximizes profits by hiring more labor when the real wage rate rises. B) the firm maximizes profits by hiring more labor when the real wage rate falls. C) workers supply more hours of work when the real wage rate rises. D) workers supply fewer hours of work when the real wage rate rises.

B) the firm maximizes profits by hiring more labor when the real wage rate falls.

27) The tables above show the labor market and the production function schedule for the country of Pickett. Potential GDP is ________. A) $9 trillion B) $25 trillion C) $14 trillion D) $40 trillion

C) $14 trillion

46) Saving and investment that increase a nation's capital lead to A) slower growth because there is a lack of consumption. B) a decrease in the amount of capital per worker. C) a decrease in labor productivity as capital is used to replace labor. D) an increase in labor productivity.

D) an increase in labor productivity.

50) In addition to saving and investment in capital, making an even larger contribution to long-term economic growth in real GDP per person A) is lower current consumption. B) is a larger work force. C) is higher current consumption. D) are technological advances.

D) are technological advances.

44) Which of the following does NOT increase labor productivity? A) technological advances B) human capital growth C) physical capital growth D) increases in aggregate hours

D) increases in aggregate hours

16) Suppose there is a rise in the price level, but no change in the money wage rate. As a result, the quantity of labor demanded A) increases. B) does not change because there is no change in the real wage rate. C) decreases only if the money wage rate also decreases. D) decreases

A) increases.

8) Moving along the aggregate production function shows the relationship between ________, holding all else constant. A) labor input and real GDP B) technology and real GDP C) labor input, capital input and real GDP D) capital input and real GDP

A) labor input and real GDP

33) Labor growth depends mainly on ________ and labor productivity growth depends mainly on ________. A) population growth; technological advances B) population growth; increases in real GDP C) growth in real GDP per person; growth rate of capital D) growth in real GDP per person; technological advances

A) population growth; technological advances

31) An increase in the working-age population results in a A) rightward shift of the supply of labor curve and an increase in potential GDP. B) leftward shift of the supply of labor curve and a decrease in potential GDP. C) rightward shift of demand for labor curve and an increase in potential GDP. D) rightward shift of the demand for labor curve and no change in potential GDP.

A) rightward shift of the supply of labor curve and an increase in potential GDP.

25) In the above figure, if the real wage is $10 per hour, a labor A) shortage will occur and the real wage will rise. B) surplus will occur and the real wage will fall. C) shortage will occur and the real wage will fall. D) surplus will occur and the real wage will rise

A) shortage will occur and the real wage will rise

48) Human capital is the A) skill and knowledge accumulated by humans. B) plant and equipment produced by humans and not by machines. C) technology used by humans to produce GDP. D) machinery used by humans to produce GDP.

A) skill and knowledge accumulated by humans.

38) If the nation's capital stock increases so that workers become more productive, the A) demand for labor will decrease B) demand for labor will increase C) supply of labor will increase D) supply of labor will decrease

B) demand for labor will increase

20) Equilibrium in the labor market A) can happen only when actual GDP exceeds potential GDP. B) occurs when actual GDP is equal to potential GDP C) means that resources are allocated inefficiently D) cannot occur if the production function is shifting upward.

B) occurs when actual GDP is equal to potential GDP

43) Factors that influence labor productivity include ________. A) the inflation rate, the real wage rate, and the exchange rate B) physical capital, human capital, and technology C) the labor demand curve D) physical capital, the real wage rate, and technology

B) physical capital, human capital, and technolog

14) The real wage rate measures the A) dollar value of an hour of work. B) quantity of goods and services that an hour of work will buy. C) dollar value of what a worker could earn in another job. D) average weekly earnings in dollars of a worker.

B) quantity of goods and services that an hour of work will buy

21) In the labor market, an increase in labor productivity ________ the real wage rate and ________ the level of employment. A) lowers; increases B) raises; increases C) raises; decreases D) lowers; decreases

B) raises; increases

22) The table above shows the labor market for the country of Pickett. When the labor market is in equilibrium, the real wage rate is ________ and ________ of labor a year are employed. A) any value less than $25 an hour; any value greater than 40 billion hours B) any value greater than $30 an hour; any value more than 40 billion hours C) $30 an hour; 40 billion hours D) any value greater than or equal to $25 an hour; any value less than 40 billion hours

C) $30 an hour; 40 billion hours

24) In the above figure, what is the full-employment real wage rate and quantity of hours per year? A) $35 and 100 billion hours per year B) $50 and 40 billion hours per year C) $40 and 60 billion hours per year D) $50 and 100 billion hours per year

C) $40 and 60 billion hours per year

15) The real wage rate equals A) (money wage) + (number of hours worked)/(price level). B) (money wage rate) × (price level). C) (money wage rate)/(price level). D) (price level)/(money wage rate).

C) (money wage rate)/(price level)

30) Employment and (total) potential GDP increase if the A) labor demand curve shifts leftward and the labor supply curve does not shift. B) labor demand curve shifts leftward more than the labor supply curve shifts rightward. C) labor supply curve shifts rightward and the labor demand curve does not shift. D) None of the above answers are correct.

C) labor supply curve shifts rightward and the labor demand curve does not shift

42) The figure above shows the U.S. production function. From 1986 to 2008 the United States experienced major advances in technology as well as an increase in the working-age population. The combined effect can best be shown by a A) movement from point Y to point Z. B) movement from point W to point X. C) movement from point W to point Z. D) movement from point Y to point X.

C) movement from point W to point Z

2) If a nation's population grows, then, A) there must be an increase in real GDP per person. B) there can be no economic growth. C) growth in real GDP per person will be greater than the growth of real GDP. D) growth in real GDP per person will be less than the growth of real GDP.

D) growth in real GDP per person will be less than the growth of real GDP.

49) On-the-job-training is an example of A) increasing labor force participation. B) investment in physical capital. C) technological change. D) investment in human capital.

D) investment in human capital.

34) Labor productivity equals A) real GDP divided by the working-age population. B) real GDP divided by the capital stock. C) total wages divided by real GDP. D) real GDP divided by aggregate labor hours.

D) real GDP divided by aggregate labor hours

39) An advance in technology that increases productivity and an increase in the working-age population results in a A) rightward shift of the labor supply curve. B) rightward shift of the labor demand curve. C) no change to the production function. D) rightward shift of the labor demand curve and of the labor supply curve.

D) rightward shift of the labor demand curve and of the labor supply curve

40) An advance in technology increases the productivity of labor. As a result, the nation's production function shifts ________ and the ________ labor curve shifts rightward. A) downward; demand for B) downward; supply of C) upward; supply of D) upward; demand for

D) upward; demand for