Homework 5

A surplus of labor is eliminated by ________ in the real wage rate and a shortage of labor is eliminated by ________ in the real wage rate.

a decrease; an increase

The quantity of labor demanded is the labor hours all

firms plan to hire at a given real wage rate.

At any given time, which factor of production is NOT fixed?

labor

To determine GDP from the production function, we need to know

quantity of labor employed

As more labor is hired, moving along the production function, diminishing returns occur because

there are fixed quantities of other resources

The substantially larger real GDP per worker in the United States then in Europe is explained by

- longer work hours - greater production per hour - better US technology

Diminishing returns means that

each additional unit of labor produces successively less real GDP

Suppose that Australia has fully employed all of its resources. This situation means that Australia

is operating at its potential GDP

The table above shows the labor demand and labor supply schedules for a nation. The equilibrium real wage rate is ________ and the equilibrium quantity of labor is ________ billions of hours per year.

$20;280

Suppose that the Australian economy initially uses 50 billion hours of labor to produce $5 trillion of real GDP. If 50 billion more hours are employed and Australia's real GDP increases by $4 trillion more

Australia's production function exhibits diminishing returns.

Which of the following can result in job rationing? i.minimum wage ii.union wage iii.diminishing returns

I and II

If New Zealand is operating at potential GDP, which of the following is TRUE? i)New Zealand only has frictional and structural unemployment. ii)There is no inflation in New Zealand. iii)New Zealand has positive net exports.

I only

Job rationing occurs when the real wage is ________ the equilibrium level and there is a ________ of labor.

above; surplus

The Monetarist model expands the Keynesian model by proposing that

decreases in the quantity of money lead to higher interest rates.

The demand for labor curve is

downward sloping, showing that the quantity of labor demanded increases when the real wage falls.

When all other influences on work plans remain the same, the

lower the real wage rate, the smaller the quantity of labor supplied.

The Classical macroeconomic model proposes that

markets work efficiently to produce the best macroeconomic outcomes.

The table above gives a nation's production function. Which of the following is NOT an attainable combination of real GDP and labor?

real GDP of $5.2 trillion and labor of 90 billion hours per year

For a household, the opportunity cost of not working is the

real wage rate

The Keynesian macroeconomic model states that

the economy is inherently unstable and government intervention is required to maintain continued economic growth.