Econ 309 MC Exam 2

When insiders have a much greater impact on the wage-bargaining process than do outsiders, the negotiated wage is likely to be _____ the equilibrium wage. a) much greater than b) much less than c) almost equal to d) about one-half of

a) much greater than

According to efficiency-wage theories, firms benefit by paying higher-than-equilibrium wages because worker _____ increases. a) productivity b) turnover c) unionization d) shirking

a) productivity

A favorable supply shock (reduce costs and prices) occurs when: a) environmental protection laws raise costs of production. b) the Fed increases the money supply. c) unions push wages up. d) an oil cartel breaks up and oil prices fall.

d) an oil cartel breaks up and oil prices fall.

All of these are reasons for frictional unemployment EXCEPT: a) workers have different preferences and abilities. b) unemployed workers accept the first job offer that they receive. c) the flow of information is imperfect. d) geographic mobility takes time.

b) unemployed workers accept the first job offer that they receive.

A policy that decreases the job separation rate _____ the natural rate of unemployment. a) will increase b) will decrease c) will not changed d) could either increase or decrease

b) will decrease

What is the expected result of a decrease in the velocity of money in the long run? a) The price level and output will both rise. b) The price level will remain constant and output will fall. c) The price level will fall and output will not change. d) The price level and output will both fall.

c) The price level will fall and output will not change.

Which is NOT a cause of frictional unemployment? a) Sectoral shifts b) Firms going out of business c) Wage rigidity d) Technological advances

c) Wage rigidity

Although not a goal of the unemployment-insurance system, one effect is that the system reduces a) The rate of job finding b) The rate of job separation c) Frictional unemployment d) Worker's uncertainty about their incomes

a) The rate of job finding

Unions contribute to structural unemployment when collective bargaining results in wages: a) above the equilibrium level. b) below the minimum wage. c) below the equilibrium level. d) above the level of unemployment compensation.

a) above the equilibrium level.

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.

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.

When a long-term aggregate supply curve is drawn with real GDP (Y) along the horizontal axis and the price level (P) along the vertical axis, this curve: a) slopes upward and to the right. b) slopes downward and to the right. c) is horizontal. d) is vertical.

d) is vertical.

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 forced d) unemployed; employed

d) unemployed; employed

Suppose that 0.75 percent of the employed lose their jobs each month, and that 15 percent of the unemployed find a job each month. What is the steady-state rate of unemployment? a) 4.76 percent b) 9.00 percent c) 14.25 percent d) 15.75 percent

a) 4.76 percent 1 / 1 + (f/s) 1 / 1 + (.15/.0075) 1 / 1 + 20 1/ 21 =

Which is NOT a cause of wage rigidity? a) Sectoral shifts b) Minimum-wage laws c) Unions d) Efficiency wages

a) Sectoral shifts

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.

Stagflation --- lower output and higher prices ---- is caused by a) an expansion in aggregate demand b) a contraction in aggregate demand c) an adverse shock (positive price shock) to aggregate supply

c) an adverse shock (positive price shock) to aggregate supply

When GDP growth declines, investment spending typically ______ and consumption spending typically ______. a) increases; increases b) increases; decreases c) decreases; decreases d) decreases; increases

c) decreases; decreases

In a typical recession, consumption _____________. Investment moves in the same direction but proportionately _______________. a) rises, more b) rises, less c) falls, more d) falls, less

c) falls, more

A short-run aggregate supply curve shows fixed ______, and a long-run aggregate supply curve shows fixed ______. a) output; output b) prices; prices c) prices; output d) output; prices

c) prices; output

Economists call the changes in the composition of demand among industries and regions: a) insider-outsider conflicts. b) sectoral shifts. c) moral hazard. d) adverse selection.

b) sectoral shifts.

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.

Which is a valid description of the aggregate demand curve? a) It tells us the possible combinations of the price level and output for a given money supply. b) It tells us the possible combinations of the price level and output for a given interest rate. c) It tells us the short-run equilibrium level of output. d) It tells us the long-run output of the economy.

a) It tells us the possible combinations of the price level and output for a given money supply.

An expansion in aggregate demand increases ____________ in the short run. In the long run, however, it increases only the ______________. a) Real GDP, price level. b) Real GDP, velocity of money. c) The unemployment rate, price level. d) The unemployment rate, velocity of money.

a) Real GDP, price level.

When the real wage is above the level that equilibrates supply and demand: a) the quantity of labor supplied exceeds the quantity demanded. b) the quantity of labor demanded exceeds the quantity supplied. c) there is no unemployment. d) the labor market clears.

a) the quantity of labor supplied exceeds the quantity demanded.

A policy that decreases the job finding rate _____ the natural rate of unemployment. a) will increase b) will decrease c) will not changed d) could either increase or decrease

a) will increase

The short run refers to a period: a) of several days. b) during which prices are sticky and cyclical unemployment may occur. c) during which capital and labor are fully employed. d) during which there are no fluctuations.

b) during which prices are sticky and cyclical unemployment may occur.

If a computer glitch at credit card companies makes stores start accepting only cash payments, the demand for money will ___________. If the money supply is held constant, the aggregate demand curve will shift to the ___________. a) increase, right b) increase, left c) decrease, right d) decrease, left

b) increase, left

Which is NOT an objective of employers when they use efficiency wages? a) Reducing labor turnover b) Eliminating involuntary unemployment c) Increasing worker quality d) Increasing workers' effort

b) Eliminating involuntary unemployment

Why do the short-run and long-run aggregate supply curves have different slopes? a) Technological advances b) Sticky prices c) Inflation expectations d) Stochastic shocks

b) Sticky prices

Which best defines the replacement rate? a) The average time it takes employers to find a replacement for workers who leave. b) The portion of the previous wage unemployment insurance gives unemployed workers. c) The difference between the going wage and the wage employers would have to pay to fully staff their businesses. d) The fraction of the labor force becoming unemployed each year due to technological advances and globalization.

b) The portion of the previous wage unemployment insurance gives unemployed workers.

For macroeconomists, what distinguishes the short run and the long run? a) The ability to change the factors of production employed b) A time period shorter or longer than two quarters c) Whether prices are sticky or flexible d) A time period shorter or longer than the time from trough to trough in the business cycle

c) Whether prices are sticky or flexible

The vertical long-run aggregate supply curve satisfies the classical dichotomy because the natural rate of output does not depend on: a) the labor supply b) the supply of capital. c) the money supply. d) technology.

c) the money supply.

All of the following are causes of structural unemployment except: a) minimum-wage laws. b) the monopoly power of unions. c) unemployment insurance. d) efficiency wages.

c) unemployment insurance.

The main goal of the unemployment-insurance system is to reduce a) The rate of job finding b) The rate of job separation c) Frictional unemployment d) Worker's uncertainty about their incomes

d) Worker's uncertainty about their incomes