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# Exam

Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1)
The labor force is defined as
1)
_______

A)
the sum of the number of employed, unemployed and discouraged individuals.
B)
the total number of working age individuals in the population.
C)
the sum of the employed and unemployed.
D)
the total number employed.

2)
Labor productivity is represented by which of the following?
2)
_______

A)
capital per worker
B)
workers per unit of capital
C)
the ratio of output to the labor force
D)
the ratio of output to population
E)
the ratio of output to employment

3)
For this question, assume that Y = N. Based on our understanding of the labor market model presented in Chapter 6, we
know that an increase in the minimum wage will cause
3)
_______

A)
an increase in the natural level of output.
B)
a reduction in the natural level of output.
C)

## no change in the natural level of output.

D)
an increase in the natural level of employment.

4)
An increase in the unemployment rate will tend to cause which of the following?
4)
_______

A)
a reduction in the separation rate
B)
an increase in the duration that one is unemployed
C)
an increase in the quit rate
D)
none of the above

For the questions below, assume the following The non-institutional civilian population is 400 million, of which 200
million are employed and 16 million are unemployed.
5)
Based on the data above, the unemployment rate is
5)
_______
4%.
5%.
7.4%.
8%.

A)
B)
C)
D)

E)
none of the above

6)
Suppose we wish to examine the determinants of the equilibrium real wage and equilibrium level of employment (N). In a
graph with the real wage on the vertical axis, and the level of employment on the horizontal axis, the price-setting relation
will now be
6)

_______

A)
a curve that first slopes upward, then downward.
B)
a downward sloping line.
C)
a vertical line.
D)
a horizontal line.
E)
an upward sloping line.

7)
As the unemployment rate falls
7)
_______

A)
the young and unskilled experience larger-than-average decreases in unemployment.
B)
the separation rate increases.
C)
the proportion of the unemployed finding a job increases.
D)
both A and C
E)
all of the above

For the questions below, assume the following The non-institutional civilian population is 400 million, of which 200
million are employed and 16 million are unemployed.
8)
Based on the data above, the labor force participation rate is
8)
_______
8%.
40%.
50%.
54%.

A)
B)
C)
D)

E)
none of the above

9)
The participation rate in the United States in 2003 was approximately equal to
9)
_______
96%.

A)

B)
90%.
C)
66%.
D)
5%.

10)
With the real wage on the vertical axis and employment (N) on the horizontal axis, we know that
10)
______

A)
the PS curve is downward sloping.
B)
the WS curve is downward sloping.
C)
the WS curve is upward sloping.
D)
the PS curve is upward sloping.

11)
Efficiency wage theory suggests that

11)
______

A)
firms will be more resistant to wage increases as the labor market tightens.
B)
the government can only set tax rates so high before people will prefer not to work.
C)
productivity might drop if the wage rate is too low.
D)
workers will be paid less than their reservation wage.
E)
unskilled workers will have a lower turnover rate than skilled workers.

12)
Based on our understanding of the labor market model presented in Chapter 6, we know that an increase in the markup
will cause
12)
______

A)
an increase in the equilibrium real wage.
B)
a reduction in the equilibrium real wage.
C)
a reduction in the natural rate of unemployment.
D)
both B and C

13)
Assume product markets less competitive in the U.S. Given this information, we would expect to observe which of the
following?
13)
______

A)
an upward shift in the WS curve
B)
a downward shift in the WS curve
C)
an upward shift in the PS curve
D)
a downward shift in the PS curve
E)

## none of the above

14)
The reservation wage is
14)
______

A)
the lowest wage firms are allowed by law to pay workers.
B)
the wage that ensures a laid-off individual will wait for re-hire, rather than find another job.
C)
the wage that an employer must pay workers to reduce turnover to a reasonable level.
D)
the wage offer that will end a labor-strike.
E)
none of the above

15)
The natural level of output is the level of output that occurs when
15)
______

A)
the unemployment rate is zero.
B)
there are no discouraged workers in the economy.
C)
the goods market and financial markets are in equilibrium.
D)
the markup (m) is zero.
E)
the economy is operating at the unemployment rate consistent with both the wage-setting and price-setting equations.

16)
In the wage-setting relation, the nominal wage increases when
16)
______

A)
unemployment benefits fall.
B)

## the minimum wage falls.

C)
the unemployment rate rises.
D)
the price level rises.
E)
all of the above

17)
Data on labor-force flows show that
17)
______

A)
almost all separations are due to death.
B)
almost all separations are layoffs.
C)
almost all separations are due to serious illness.
D)
almost all separations are quits.
E)
none of the above

18)
Based on price setting behavior, we know that a reduction in the unemployment rate will cause
18)
______

A)
an increase in the real wage.
B)
an upward shift of the PS curve.
C)
a reduction in the real wage.
D)
no change in the real wage.

19)

Based on wage setting behavior, we know that a reduction in the unemployment rate will cause
19)
______

A)
a reduction in the real wage.
B)
an increase in the real wage.
C)
an upward shift of the WS curve.
D)
no change in the real wage.

20)
An increase in unemployment insurance will tend to cause which of the following?
20)
______

A)
an upward shift in the WS curve
B)
a downward shift in the WS curve
C)
an upward shift in the PS curve
D)
a downward shift in the PS curve
E)
none of the above

21)
For this question, assume there is perfect competition in the product market. Given this assumption, we know that m (in
the price setting equation P = (1+m)W) will equal
21)
______
W.

A)

B)

W/P.
C)
0.
D)
P.
E)
1.

22)
In the United States, how many workers become unemployed, on average, every day?
22)
______
5,000

A)

B)
10,000
C)
50,000
D)
100,000

23)
Suppose the actual unemployment rate decreases. This will cause
23)
______

A)
a downward shift in the WS curve.
B)
a downward shift in the PS curve.
C)
an upward shift in the WS curve.

D)
an upward shift in the PS curve.
E)
none of the above

24)
When the Current Population Survey (CPS) was introduced in 1940, it was based on a survey of how many households?
24)
______
50,000

A)

B)
1,000
C)
60,000
D)
2,000
E)
8,000

25)
Suppose the actual unemployment rate increases. This will cause
25)
______

A)
an upward shift in the PS curve.
B)
an upward shift in the WS curve.
C)
a downward shift in the WS curve.
D)
a movement along the WS and the PS curves.
E)
none of the above

26)
For this question, assume that Y = N. Based on our understanding of the labor market model presented in Chapter 6, we
know that a reduction in the markup will cause
26)
______

A)
an increase in the natural level of output.
B)
a reduction in the natural level of output.
C)
no change in the natural level of output.
D)
a reduction in the natural level of employment.

27)
The Current Population Survey interviews approximately how many households each month?
27)
______
5000

A)

B)
10,000
C)
60,000
D)
100,000

28)
Henry Ford's experiment with efficiency wages resulted in
28)
______

A)
new problems with the work force, like drunkenness and reckless driving.

B)
a dramatic drop in productivity.
C)
no noticeable effects.
D)
a dramatic increase in the turnover rate.
E)
a reduction in the layoff rate.

For the questions below, assume the following The non-institutional civilian population is 400 million, of which 200
million are employed and 16 million are unemployed.
29)
Based on the data above, the non-employment rate is
29)
______
4%.
8%.
50%.
54%.

A)
B)
C)
D)

E)
none of the above

30)
If efficiency wage theory is valid, we would expect a relatively low premium over the reservation wage when
30)
______

A)
workers have few other options for employment in the area.
B)
the job requires very little training.
C)
the unemployment rate is low.
D)
workers can be easily monitored.
E)
all of the above

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