Question 1

Potential output in an economy decreases as the supply of labor decreases or the capital stock increases.

Accepted Answer

A) True 
 B)False  False

Question 2

An increase in the employment tax will have no effect on output if the labor supply curve

Accepted Answer

A)   has a negative slope.
B)   is perfectly vertical.
C)   is perfectly horizontal.
D)   has a positive slope.E) None of the above
F) All of the above

Question 3

Crowding out refers to

Accepted Answer

A)   increases in consumption, investment, or net exports caused by an increase in government purchases.
B)   decreases in consumption, investment, or net exports caused by an increase in government purchases.
C)   reductions in tax revenues associated with increases in tax rates.
D)   increases in tax revenues associated with increases in tax rates.E) C) and D)
F) None of the above B

Question 4

When there is a decrease in labor supply, real wages are likely to

Accepted Answer

A)   remain the same.
B)   increase.
C)   decrease.
D)   allow less leisure time.E) A) and B)
F) A) and C)

Question 5

Table 7.1
  
Assume the stock of capital is held constant.
-Refer to Table 7.1. As labor inputs increase from 5 to 6, output

Accepted Answer

A)   increases by 16 units.
B)   increases by 98 units.
C)   increases at a negative rate.
D)   increases by 12 units.E) A) and B)
F) None of the above

Question 6

The nominal wage is the wage rate adjusted for changes in the price level.

Accepted Answer

A) True 
 B)False

Question 7

If the government liberalizes immigration policies, the demand for labor will ________, the real wage will ________, and the quantity of labor hired will ________.

Accepted Answer

A)   remain the same; decrease; decrease
B)   increase; decrease; remain the same
C)   remain the same; increase; decrease
D)   remain the same; decrease; increaseE) All of the above
F) A) and B)

Question 8

Suppose the stock of capital remains constant. By adding more labor, perhaps a second work shift, output

Accepted Answer

A)   decreases.
B)   increases.
C)   remains the same.
D)   becomes more costly.E) None of the above
F) A) and B)

Question 9

What assumptions are made concerning wages and prices in a classical economic model?

Accepted Answer

Wages and prices adj...

Question 10

The ________ curve shows a(n) ________ relationship between the real wage and the number of workers who are willing to work.

Accepted Answer

A)   labor demand; positive
B)   labor demand; direct
C)   labor supply; positive
D)   labor supply; inverseE) All of the above
F) None of the above

Question 11

An open economy refers to an economy with

Accepted Answer

A)   unrestricted immigration.
B)   international trade.
C)   no trade barriers.
D)   no government intervention.E) A) and C)
F) B) and C)

Question 12

The real business cycle theory emphasizes that in today's modern age, ________ technology plays a significant role in causing economic fluctuations.

Accepted Answer

A)   shocks to
B)   advances in
C)   obsolete ideas in
D)   duplications inE) C) and D)
F) B) and C)

Question 13

An increase in the amount of capital in the economy will shift the demand curve for labor to the left.

Accepted Answer

A) True 
 B)False  False

Question 14

The level of output produced when the labor market is in equilibrium is called

Accepted Answer

A)   natural output.
B)   target output.
C)   product market equilibrium output.
D)   full-employment output.E) A) and B)
F) All of the above

Question 15

The main effect of a decrease in labor demand that arises from a decrease in capital stock is

Accepted Answer

A)   shifts in unemployment.
B)   a need for fewer immigrant workers.
C)   lower real wages.
D)   companies make fewer profits.E) C) and D)
F) A) and B)

Question 16

Suppose that a technological decline makes labor less productive. What is likely to happen to wages and to potential output?

Accepted Answer

A)   Wages increase and potential output increases.
B)   Wages increase and potential output decreases.
C)   Wages decrease and potential output increases.
D)   Wages decrease and potential output decreases.E) A) and B)
F) A) and C)

Question 17

Table 7.1
  
Assume the stock of capital is held constant.
-Table 7.1 exemplifies the principle of

Accepted Answer

A)   real vs. nominal costs.
B)   marginal costs.
C)   diminishing returns.
D)   full employment equilibrium.E) A) and B)
F) C) and D)

Question 18

Suppose the government cracks down on illegal immigration. How will this affect the demand and supply of labor.

Accepted Answer

The reduction in immigration causes a de...

Question 19

The difference between exports and imports in GDP is called

Accepted Answer

A)   net imports.
B)   net exports.
C)   import tariffs.
D)   gross imports.E) A) and B)
F) A) and C)

Question 20

Full-employment output is also called

Accepted Answer

A)   natural output.
B)   national output.
C)   potential output.
D)   target output.E) B) and C)
F) All of the above

Exam 7:The Economy at Full Employment

Potential output in an economy decreases as the supply of labor decreases or the capital stock increases.

Correct AnswerverifiedFalse

An increase in the employment tax will have no effect on output if the labor supply curve

Correct AnswerverifiedShow Answer

Crowding out refers to

Correct AnswerverifiedB

When there is a decrease in labor supply, real wages are likely to

Correct AnswerverifiedShow Answer

Table 7.1 Assume the stock of capital is held constant. -Refer to Table 7.1. As labor inputs increase from 5 to 6, output

Correct AnswerverifiedShow Answer

The nominal wage is the wage rate adjusted for changes in the price level.

Correct AnswerverifiedShow Answer

If the government liberalizes immigration policies, the demand for labor will ________, the real wage will ________, and the quantity of labor hired will ________.

Correct AnswerverifiedShow Answer

Suppose the stock of capital remains constant. By adding more labor, perhaps a second work shift, output

Correct AnswerverifiedShow Answer

What assumptions are made concerning wages and prices in a classical economic model?

Correct AnswerverifiedWages and prices adj...View AnswerShow Answer

The ________ curve shows a(n) ________ relationship between the real wage and the number of workers who are willing to work.

Correct AnswerverifiedShow Answer

An open economy refers to an economy with

Correct AnswerverifiedShow Answer

The real business cycle theory emphasizes that in today's modern age, ________ technology plays a significant role in causing economic fluctuations.

Correct AnswerverifiedShow Answer

An increase in the amount of capital in the economy will shift the demand curve for labor to the left.

Correct AnswerverifiedFalse

The level of output produced when the labor market is in equilibrium is called

Correct AnswerverifiedShow Answer

The main effect of a decrease in labor demand that arises from a decrease in capital stock is

Correct AnswerverifiedShow Answer

Suppose that a technological decline makes labor less productive. What is likely to happen to wages and to potential output?

Correct AnswerverifiedShow Answer

Table 7.1 Assume the stock of capital is held constant. -Table 7.1 exemplifies the principle of

Correct AnswerverifiedShow Answer

Suppose the government cracks down on illegal immigration. How will this affect the demand and supply of labor.

Correct AnswerverifiedThe reduction in immigration causes a de...View AnswerShow Answer

The difference between exports and imports in GDP is called

Correct AnswerverifiedShow Answer

Full-employment output is also called

Correct AnswerverifiedShow Answer

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False

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B

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If the government liberalizes immigration policies, the demand for labor will , the real wage will , and the quantity of labor hired will .

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Wages and prices adj...
View Answer

The curve shows a(n) relationship between the real wage and the number of workers who are willing to work.

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False

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The reduction in immigration causes a de...
View Answer

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