Hw11 macro

The long run in macroeconomics is a period in which wages and prices are flexible and there is full market adjustment.

True

An unemployed person is

a person without a job who is actively seeking and available for work.

According to Okun's law

an increase in real gdp growth above trend, will lower unemployment

What determines the level of output in the long-run classical model?

capital, labor, productivity

The vertical long-run aggregate supply curve implies that shifts in aggregate demand will, in the long-run,

change prices only

The natural level of employment occurs if there is no

cyclical unemployment.

The natural rate of unemployment

equals the sum of frictional and structural unemployment.

Which of the following reduces the duration of frictional unemployment?

establishing employment agencies which give out information about job vacancies

People who are in the process of changing jobs are counted as

frictionally unemployed.

What determines prices and inflation in the long-run classical model?

money supply

Which of the following would tend to increase the natural rate of unemployment?

more college graduates entering the labor force

According to the Bureau of Labor Statistics, a person who is not working and is not looking for work is

not a member of the labor force.

Cyclical unemployment

occurs only during a recession.

Wage and price stickiness

prevents the economy from producing its potential level of real GDP.

Suppose that product prices start rising but nominal wages do not. In that case,

real wages will fall and firms will want to produce more because doing so will be profitable.

What determines the the real interest rate in the long-run classical model?

savings and investment

The long-run aggregate supply curve is upward sloping (rather than vertical) in the short-run due to

sticky wages

Unemployment that results from a mismatch between worker qualifications and the characteristics employers require is called _________ unemployment.

structural

Consider the following: A country's frictional unemployment rate is 3%, the natural unemployment rate is 5.5%, and the cyclical unemployment rate is 2.4%. Calculate the structural unemployment rate and the unemployment rate.

structural unemployment rate = 2.5%; the unemployment rate = 7.9%

A number of semi-skilled workers in an industry find themselves out of work when improvements in technology render their jobs obsolete. These workers experience

structural unemployment.

Structural unemployment exists because

technological changes make the skills of the workers incompatible with the skills used on the job.

Welfare reforms enacted in 1996 put more pressure on welfare recipients to look for work. The new law mandated cutting off benefits after a certain length of time. Which of the following is likely to occur as a result of this provision?

the natural rate of unemployment and the unemployment rate are likely to increase.

Which of the following is a source of frictional unemployment?

the time it takes to search for jobs that best matches one's skills

According to classical marginal productivity theory, workers are paid

the value of their marginal product

In the long run, unemployment will be at the natural rate. This implies that

there is no relationship between unemployment and inflation and consequently, the Phillips curve is vertical.

The labor force is made up of

those who are employed plus those who are unemployed.

In general, the duration of job search will be shorter if

unemployment compensation benefits decrease.

If the population of the United States is 260 million, the labor force is 130 million, and 120 million workers are employed, the rate of unemployment is

7.7%

Which of the following is an example of structural unemployment?

A geologist who is permanently laid off from an oil company due to a new technological advance.

What's meant by the NAIRU (Natural Rate of Unemployment)?

-It is the full-employment unemployment rate -It is the unemployment rate at which there is only frictional and structural unemployment -it is the unemployment rate at which the labor market has fully adjusted

Which of the following is a source of wage stickiness?

-fixed wage contracts -minimum wage laws -workers and firms want to avoid complexity of negotiating contracts frequently

The natural rate of unemployment

-includes frictional and structural unemployment. -is the unemployment rate that exists when the quantity of labor demanded is equal to the quantity of labor supplied.

Which of the following statements is true of the economy in the long run? In the long run,

-real GDP eventually moves to potential because all wages and prices are assumed to be flexible. -the economy can achieve its natural level of employment and potential output at any price level. -there is no cyclical unemployment.

If more people find jobs, the unemployment rate will definitely fall

False

The Phillips curve implies a positive relationship between inflation and unemployment.

False

The long-run Phillips curve shows an inverse relation between inflation and unemployment

False

What does the phrase "jobless recovery" refer to?

It refers to a recovery from a recession which does not produce strong growth in employment.

What do economists mean by the term "sticky wage"?

It refers to a wage that is slow to adjust to its equilibrium level, creating sustained periods of shortage or surplus in the labor market.

Which of the following individuals would not be included in the labor force?

Kit, who has retired and is not looking for work.

For a given labor force, an increase in real GDP implies a decrease in unemployment.

True