Q&A Hero

Q: Job search is defined as A) the activity of looking for an acceptable, vacant job. B) saying you are looking for a job when you are actually not looking. C) attending school to increase your employability. D) equivalent to job rationing. E) being paid an efficiency wage.

Q: In the United States since 1960, the average unemployment rate was highest during the decade of the A) 1960s. B) 1970s. C) 1980s. D) 1990s. E) 2000s.

Q: The two fundamental causes of unemployment at full employment are A) seasonal jobs and technological change. B) foreign competition and financial bankruptcies. C) job search and job rationing. D) decreases in labor productivity and more generous retirement benefits. E) demographic change and decreases in the demand for labor.

Q: The real minimum wage rate A) has generally increased since 1967. B) has generally decreased during the 1970s and 1980s and has fluctuated around a $6.50 per hour average since the mid-1980s. C) was at its highest level in 1995. D) fell after 1967 until it reached a minimum around 1985 and has generally risen since then. E) has stayed in the range between $6 and $5 (measured in 2009 dollars per hour) since 1967.

Q: The Fair Labor Standards Act originally set the minimum wage at A) $1.25 in 1983. B) $1.25 in 1938. C) $0.25 in 1938. D) $0.25 in 1983. E) $3.00 in 1960.

Q: The presence of union wages leads to A) a fall in the real wage rate as fewer people are hired. B) a fall in the real wage rate as more people are hired. C) less job search as more workers are hired. D) job rationing because the real wage exceeds the equilibrium real wage. E) lower unemployment because workers do not want to lose the high union wage they are being paid.

Q: It is estimated that, on the average and ________, union wages are ________ because ________. A) without taking account of skill differentials; 15-20 percent higher than nonunion wages; employers are biased against nonunion workers B) taking account of skill differentials; 30 percent higher than nonunion wages; in some industries union workers perform jobs that require greater skill than nonunion workers and employers show bias against nonunion workers C) without taking account of skill differentials; 30 percent higher than nonunion wages; in some industries union workers perform jobs that require greater skill than nonunion workers D) taking account of skill differentials; 30 percent higher than nonunion wages; union workers are better qualified than nonunion workers E) without taking account of skill differentials; equal to nonunion wages; differentiating based on union membership is discrimination and illegal

Q: It is estimated that, on the average and taking account of skill differentials, union wages are A) less than nonunion wages. B) equal to nonunion wages. C) 10-25 percent higher than nonunion wages. D) 100 percent higher than nonunion wages. E) 66 percent higher than nonunion wages.

Q: It is estimated that, on the average and without taking account of skill differentials, union wages areA) less than nonunion wages.B) equal to nonunion wages.C) 30 percent higher than nonunion wages.D) 100 percent higher than nonunion wages.E) 66 percent higher than nonunion wages.

Q: In the above figure, a(n) ________ would be set ________.A) efficiency wage; above $9.00 and would increase the natural rate of unemploymentB) effective minimum wage; above $6.00.C) union wage; above $9.00 but would not affect the natural rate of unemployment.D) efficiency wage; above $6.00.E) efficiency wage; below $9.00

Q: In the above figure, a minimum wage will not change the unemployment rate if it is set atA) $6.00.B) $9.00.C) $12.00.D) Both B and C are correct because any wage rate that exceeds $9 per hour has no effect on the unemployment rate.E) None of the above because the minimum wage always affects the unemployment rate.

Q: The table above gives the labor market for a small foreign economy. A(n) ________ would create ________.A) minimum wage of $5.00; an increase in job rationing.B) union-negotiated wage of $7.50; unemployment and job rationing.C) efficiency wage of $8.00; unemployment and job rationing.D) efficiency wage of $9.00; an increase in job rationing.E) minimum wage of $9.00; a decrease in job search.

Q: The table above gives the labor market for a small foreign economy. A minimum wage law that sets the minimum wage at $8.50 per hour producesA) equilibrium in the labor market.B) a labor surplus of 25 million hours.C) a labor shortage of 25 million hours.D) a labor surplus of $0.50 per hour.E) a labor surplus of 65 million hours.

Q: The table above gives the labor market for a small foreign economy. Equilibrium in the labor market occurs at a real wage rate ofA) $7.15 per hour.B) $7.65 per hour.C) $8.00 per hour.D) $8.50 per hour.E) $9.00 per hour.

Q: According to the above table, if the minimum wage is set at $20 per hour, thenA) there is an excess demand for labor.B) the quantity of labor supplied exceeds the quantity of labor demanded by 50 million hours per month.C) the quantity of labor demanded will increase until it is equal to the quantity of labor supplied.D) the labor demand curve will shift until $20 is the new equilibrium real wage rate.E) the labor supply curve will shift until $20 is the new equilibrium real wage rate.

Q: If the minimum wage is setA) below the equilibrium wage rate, it will create unemployment.B) above the equilibrium wage rate, it will create unemployment.C) equal to the equilibrium wage rate, it will create a shortage of labor.D) below the equilibrium wage rate, it will create a shortage of labor.E) equal to the equilibrium wage rate, it will create a surplus of labor.

Q: Which of the following will increase the natural unemployment rate? i. a minimum wage set above the equilibrium wage rate ii. efficiency wages iii. union-negotiated wages A) i only B) i and ii C) i and iii only D) ii and iii only E) i, ii and iii

Q: A minimum wage set above the equilibrium wage rate A) increases the natural unemployment rate. B) increases the demand for labor. C) increases the number of workers employed. D) decreases job rationing. E) decreases the natural unemployment rate because fewer workers will become unemployed.

Q: The minimum wage is a A) possible cause of job search because it lowers wages below their equilibrium. B) possible cause of job rationing because it lowers wages below their equilibrium. C) government established highest wage that is legal to pay. D) possible cause of job rationing because it raises wages above their equilibrium. E) factor that decreases unemployment because fewer people search for work if the minimum wage is increased.

Q: If the minimum wage rate is set above the equilibrium wage rate, then A) unemployment definitely increases. B) unemployment definitely decreases. C) unemployment definitely does not change. D) unemployment either decreases or does not change. E) None of the above answers is correct because the minimum wage decreases search but its effect on unemployment is ambiguous.

Q: A minimum wage rate that is set ________ the equilibrium real wage rate creates a ________ of labor. A) above; surplus B) above; shortage C) below; surplus D) below; shortage E) equal to; shortage

Q: To increase workers' incomes, the City of New York's government set a wage below which it is illegal for employers to pay employees. This wage is referred to as the A) minimum wage. B) efficiency wage. C) government wage. D) union wage. E) city wage.

Q: The figure above shows the labor market in a small town. If the government imposes ________ that firms must at least pay, the effect will be ________ because ________.A) a minimum wage of $10; an increase in unemployment; a surplus of labor is createdB) a minimum wage of $10; a decrease in unemployment; a shortage of labor is createdC) an efficiency wage of $10; a decrease in unemployment; a surplus of labor is createdD) an efficiency wage of $10; an increase in unemployment; a shortage of labor is createdE) a minimum wage of $10; no change in unemployment; it will not affect how firms demand labor

Q: The figure above shows the labor market in a small town. If the government imposes a wage of $10 that firms must at least pay,A) the government has imposed a minimum wage and market forces are not allowed to work.B) the government has imposed an efficiency wage.C) job search will decrease.D) job rationing will decrease.E) inflation will occur as wages rise.

Q: The figure above shows the market for fast food restaurant employees in a college town in a small nation to the East. The local Taco Bell pays its workers $12 an hour. This wage rate isA) an efficiency wage aimed at reducing employee turnover.B) designed reduce the unemployment rate.C) an effort to increase the demand for labor.D) the actual equilibrium wage rate.E) illegal because the equilibrium wage rate is $6 an hour.

Q: Efficiency wages areA) the legal minimum wage a firm can pay a worker.B) a possible cause of job rationing because they drive wages below their equilibrium level.C) a possible cause of job rationing because they drive wages above their equilibrium level.D) a possible cause of job rationing because they force wages to equal their equilibrium level.E) another name for the equilibrium wage.

Q: An efficiency wage ________ because ________. A) decreases job rationing; the real wage rate is lowered below the equilibrium B) increases job rationing; the real wage rate is lowered below the equilibrium C) decreases job rationing; the real wage rate is raised above the equilibrium D) increases job rationing; the real wage rate is raised above the equilibrium E) is used often; it is inexpensive and effective

Q: An efficiency wage is ________ because the result is ________. A) set above the equilibrium real wage; reduced turnover and less work effort B) set above the equilibrium real wage; increased turnover and more work effort C) set below the equilibrium real wage; reduced turnover and more work effort D) set above the equilibrium real wage; reduced turnover and more work effort E) not often used; not much different from minimum wage use

Q: An efficiency wage is designed to ________ work effort and to ________ labor turnover. A) decrease; lower B) decrease; raise C) increase; raise D) increase; lower E) not change; decrease

Q: An efficiency wage is designed to A) induce more work effort. B) keep the minimum wage from rising. C) keep the minimum wage from falling. D) to induce more employment. E) decrease the need for workers to search for jobs.

Q: An efficiency wage A) is set above the equilibrium real wage rate to induce greater work effort. B) is set below the equilibrium real wage rate to reduce labor costs. C) increases the supply of labor and therefore increases potential GDP. D) increases the demand for labor and therefore increases potential GDP. E) reduces frictional unemployment.

Q: Efficiency wages are A) mandated by law. B) set below the equilibrium level of the real wage. C) offered by firms who want to reduce turnover in the labor force. D) special wages offered to teenagers. E) the result of demographic change.

Q: The presence of efficiency, minimum and union wages A) can explain job rationing because they lower the natural unemployment rate. B) can explain job rationing because they raise the real wage rate above equilibrium. C) can explain job rationing because they lower the real wage rate below equilibrium. D) does not affect job rationing because they affect only the amount of job search. E) cannot explain job rationing because they are a natural part of the economy.

Q: Efficiency wages, above equilibrium minimum wage rates, and higher union wages are likely to A) increase the natural unemployment rate. B) increase cyclical unemployment. C) reduce the equilibrium real wage rate. D) increase the equilibrium real wage rate. E) decrease the natural unemployment rate.

Q: Suppose the full-employment equilibrium real wage rate is $11 per hour while the actual real wage rate is $12 per hour. If the actual real wage rate does not change, then A) job rationing will occur. B) job search will decline. C) a positive Okun Gap will occur. D) the production function will shift downward. E) job rationing will decrease.

Q: Which of the following can result in job rationing? i. minimum wage ii. union wage iii. diminishing returns A) i only B) ii only C) iii only D) i and ii E) i, ii, and iii

Q: Job rationing occurs when the real wage is ________ the equilibrium level and there is a ________ of labor. A) above; shortage B) above; surplus C) below; shortage D) below; surplus E) equal to; shortage

Q: Which of the following creates job rationing? A) The real wage rate is below the equilibrium level. B) The real wage rate is above the equilibrium level. C) The real wage rate is equal to the equilibrium level. D) Job search decreases. E) An increase in unemployment benefits.

Q: Job rationing occurs when the real wage rate is A) below the equilibrium wage rate so there is an excess supply of labor. B) above the equilibrium wage rate so there is a shortage of labor. C) equal to the equilibrium wage rate so there is no excess supply of labor. D) above the equilibrium wage rate so there is an excess supply of labor. E) Both answers A and D are correct because whenever the real wage rate is above or below the equilibrium wage rate, there is an excess supply of labor.

Q: Structural change influences the unemployment rate and such structural change is created by changes in A) real GDP. B) the seasons. C) technology. D) population. E) the minimum wage.

Q: If we compare the Canadian natural unemployment rate to the U.S. natural unemployment rate, we find that for most years since 1980 A) they are essentially the same because we have a lot in common. B) the Canadian rate is higher, possibly the result of higher unemployment benefits in Canada for most of those years. C) the U.S. rate is higher, possibly the result of greater job search within a larger country. D) the Canadian rate is higher, possibly the result of higher unemployment benefits in the United States for most of those years. E) The U.S. rate is higher, possibly the result of more structural change occurring in the United States.

Q: France is considering implementing policies that will reduce the duration of job search. A possible option is for France to A) increase the minimum wage. B) help negotiate higher union benefits for employed workers. C) reduce unemployment benefits. D) require all residents between the ages of 19 and 26 to obtain a part-time or full-time job. E) Both answers A and B are correct.

Q: The length of time people spend in search of a job increases if A) the population ages. B) unemployment benefits increase. C) the criteria necessary to qualify for unemployment benefits increases. D) there is a sudden change in technology. E) the minimum wage is decreased.

Q: The lower the amount of unemployment benefits citizens receive, the A) higher the opportunity cost of job search. B) lower the opportunity cost of job search. C) the higher the natural unemployment rate. D) the longer people search for jobs. E) higher the wage people must be offered before they accept a job.

Q: The natural unemployment rate is higher if A) unemployment benefits become more generous. B) there is a decrease in the working-age population. C) there are fewer two-income households. D) many of the new jobs created require skills possessed by the available labor. E) efficiency wages are lower.

Q: More generous unemployment benefits ________ the opportunity cost of looking for a new job and therefore ________ the job search process A) lower; extend B) lower; shorten C) raise; extend D) raise; shorten E) lower; does not change

Q: If the amount paid as unemployment benefits decreases, the opportunity cost of job search A) rises and people would stay unemployed longer. B) is not affected because unemployment benefits do not change job availability. C) rises and people stay unemployed for a shorter time. D) falls and people stay unemployed for a shorter time. E) falls and people stay unemployed for a longer time.

Q: The length of time an unemployed person searches for a job is likely to increase as A) the working age population gets older. B) the birth rate declines. C) new technologies make workers more productive. D) unemployment benefits become more generous. E) job rationing decreases.

Q: Which of the following increases frictional and/or structural unemployment? i. more young workers entering the labor force ii. more generous unemployment benefits iii. a structural slump with some industries dying A) i only B) ii only C) iii only D) i and ii E) i, ii. and iii

Q: A newspaper headline reads "A New Wave of Workers Enters the Job Market!" This wave of young, new entrants to the labor market is likely to lead to A) an increase in the natural unemployment rate. B) a decrease in the unemployment rate. C) no effect on the unemployment rate. D) a decrease in the country's potential GDP. E) a decrease in the natural unemployment rate but an increase in the actual unemployment rate.

Q: The increase in the average unemployment rate in the 1970s was the result of A) the reduction of overly generous unemployment benefits in the 1970s. B) an increase in the birth rate in the early 1970s. C) an increase in the birth rate in the late 1940s and early 1950s. D) higher real wage rates. E) repeated increases in the minimum wage.

Q: Suppose job search has decreased over the last several years. This decrease could be a result of i. a change in unemployment benefits. ii. a positive structural change. iii. a higher inflation rate. A) ii only B) i only C) i and ii D) ii and iii E) i and iii

Q: The natural unemployment rate is the result of A) bad government policies. B) insufficient demand for labor. C) job search and job rationing. D) the Lucas Wedge. E) the Okun Gap.

Q: Which of the following explain the natural rate of unemployment? i. job search ii. the Okun Gap iii. the production function A) i and iii B) i only C) iii only D) ii and iii E) i and ii

Q: The unemployment rate at full employment is A) zero. B) the natural unemployment rate. C) equal to the rationed rate of unemployment. D) undefined because the economy is never at full employment. E) equal the amount of unemployment caused by job search.

Q: Compared to the U.S. production function, the European production function isA) higher.B) lower.C) the same.D) lower than the U.S. production function at low levels of employment and higher than the U.S. production function at high levels of employment.E) higher than the U.S. production function at low levels of employment and lower than the U.S. production function at high levels of employment.

Q: When the labor market is in equilibrium, real GDP ________ potential GDP. A) is greater than B) is equal to C) is less than D) might be greater than, less than, or equal to E) is not comparable to

Q: The real wage rate is $35 an hour. At this wage rate there are 100 billion labor hours supplied and 200 billion labor hours demanded. There is a A) shortage of 300 billion hours of labor. B) shortage of 100 billion hours of labor. C) surplus of 100 billion hours of labor. D) surplus of 300 billion hours of labor. E) shortage of 200 billion hours of labor.

Q: The supply of labor curve has a ________ slope because as the real wage rate rises, ________. A) negative; firms hire fewer workers B) positive; the opportunity cost of leisure rises C) positive; the opportunity cost of leisure falls D) negative; households work more hours E) positive; firms offer more jobs

Q: The quantity of labor demanded definitely increases if the A) real wage rate rises. B) real wage rate falls. C) nominal wage rate rises. D) nominal wage rate falls. E) supply of labor decreases.

Q: The production function graphs the relationship between A) nominal GDP and real GDP. B) real GDP and the quantity of labor employed. C) real GDP and capital. D) nominal GDP and the quantity of labor employed. E) real GDP and the supply of labor.

Q: With fixed quantities of capital, land, and entrepreneurship and fixed technology, the amount of real GDP produced increases when ________ increases. i. the quantity of labor employed ii. the inflation rate iii. the price level A) i only B) ii only C) iii only D) ii and iii E) i, ii, and iii

Q: Potential GDP A) is the quantity of GDP produced when the economy is at full employment of all resources. B) can never be exceeded. C) can never be attained. D) is another name for real GDP. E) is another name for nominal GDP.

Q: ________ adopts the view that aggregate fluctuations are a natural consequence of an expanding economy. A) Classical macroeconomics B) Keynesian economics C) The new macroeconomics D) The Lucas Wedge E) The Okun Gap

Q: In the United States between the 1970s and the 2000s, the productivity of labor increased. This increase led to A) an increase in the demand for labor. B) an increase in the supply of labor. C) a downward shift of the production function. D) a decrease in the supply of labor. E) no change in either the demand for or the supply of labor.

Q: The tables above show a nation's labor demand and labor supply schedules and its production function. Given the equilibrium in the labor market, potential GDP isA) $3.0 trillion.B) $3.7 trillion.C) $4.2 trillion.D) $4.5 trillion.E) $2.0 trillion.

Q: The tables above show a nation's labor demand and labor supply schedules and its production function. The equilibrium real wage rate is ________ and the equilibrium quantity of labor is ________ billion hours per year.A) $50; 100B) $40; 90C) $30; 80D) $40; 80E) $20; 110

Q: 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.A) $25; 260B) $20; 280C) $20; 260D) $15; 260E) $40; 320

Q: In a labor market without an efficiency wage, minimum wage, or union wage, when the real wage rate exceeds the equilibrium real wage rate, there is a ________ of labor and the real wage rate will ________.A) surplus; fallB) shortage; fallC) shortage; riseD) surplus; riseE) surplus; not change because only efficiency wages or union wages can change.

Q: When the labor market is in equilibrium, A) there is excess labor supplied, which keeps real GDP less than potential GDP. B) there is full employment, which means that real GDP equals potential GDP. C) the real wage rate falls to equal the nominal wage rate because real GDP is greater than potential GDP. D) the real wage rate rises to allow real GDP to equal potential GDP. E) there is full employment but real GDP might be greater than, less than, or equal to potential GDP.

Q: When the labor market is in equilibrium, i. the quantity demanded of labor equals the quantity supplied. ii. there is full employment. iii. potential GDP is produced. A) i only B) ii only C) iii only D) i and iii E) i, ii, and iii

Q: When the labor market is in equilibrium so that the quantity of labor supplied equals the quantity demanded, A) there is no unemployment. B) the economy is at full employment. C) nominal GDP equals real GDP. D) there is no inflation. E) real GDP might be more than, less than, or equal to potential GDP.

Q: A surplus in the labor market indicates that the A) real wage rate is above the equilibrium wage rate but it is too low to eliminate the surplus of labor. B) quantity of labor demanded is less than the quantity of labor supplied. C) real wage rate has to rise before the labor market will reach equilibrium. D) workers are not looking for work because they enjoy their leisure time. E) real wage rate is less than the equilibrium wage rate.

Q: 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) an increase; an increase B) an increase; a decrease C) a decrease; an increase D) a decrease; a decrease E) None of the above answers is correct because shortages and surpluses are eliminated by changes in the demand for labor and the supply of labor, not the wage rate.

Q: The labor market is in equilibrium whenever A) the nominal wage rate is decreasing. B) the nominal wage rate is increasing. C) the nominal wage rate is not changing. D) the real wage rate is increasing. E) the quantity of labor demanded equals the quantity of labor supplied.

Q: The labor force participation rate A) increases as the real wage increases. B) decreases as the real wage increases. C) has nothing to do with the real wage rate. D) increases as the opportunity cost of working increases. E) is one of the major reasons that firms pay efficiency wages.

Q: As the real wage rate rises, the opportunity cost of A) working rises. B) saving rises. C) leisure rises. D) leisure falls. E) buying goods and services rises.

Q: The quantity of labor supplied increases as the real wage rises because A) higher real wages mean that nominal wages have increased. B) the opportunity cost of working increases. C) the quantity of labor demanded increases. D) the opportunity cost of leisure rises. E) labor force participation decreases so that only serious workers are left in the labor force.

Q: When all other influences on work plans remain the same, the A) lower the real wage rate, the smaller the quantity of labor supplied. B) higher the real wage rate, the greater the quantity of labor demanded. C) lower the real wage rate, the greater the quantity of labor supplied. D) lower the real wage rate, the smaller the quantity of labor demanded. E) lower the real wage rate, the larger the labor force participation.

Q: Holding all other influences constant, the quantity of labor supplied in a given time period depends A) inversely on the real wage rate so that a higher real wage decreases the quantity of labor supplied. B) directly on the real wage rate so that a higher real wage increases the quantity of labor supplied. C) inversely on the quantity of labor demanded. D) on the money wage rate not the real wage rate. E) directly on the quantity of labor demanded.