Assignment 3

Question 1

An individual is said to be a discouraged worker if he or she _____

Answer 1

wants to work but has given up searching for a job

Question 2

When unemployment increases usually ____

Answer 2

a reduction in the labor force participation rate

Question 3

The GDP deflator provides a measure of ___

Answer 3

the ratio of the nominal GDP to real GDP

Question 4

Changes in GDP in the short run are caused primarily by

Answer 4

demand factors

Question 5

Changes in GDP in the medium run are caused primarily by

Answer 5

supply factors

Question 6

Changes in GDP in the long run are caused primarily by

Answer 6

none of the above

Question 7

Okin’s Law shows the relationship between ___

Answer 7

output growth and unemployment

Question 8

The Philips curve describes the relationship between _____

Answer 8

inflation and unemployment

Question 9

The non-institutional civilian population is 250 millions, of which 100 million are employed and 10 millions are unemployed. The unemployment rate is ___

Answer 9

9.1 %

Unemployment rate = people unemployed/(people employed +people unemployed)

Question 10

The non-institutional civilian population is 250 millions, of which 100 million are employed and 10 millions are unemployed. The labor force rate is ___

Answer 10

44%

Labor force rate = (People employed + People Unemployed) /Total Population

Question 11

The non-institutional civilian population is 250 millions, of which 100 million are employed and 10 millions are unemployed. The non-employment rate is ___

Answer 11

60%

Non-employed rate = People non-employed/Total population

Question 12

Which variable is most directly determined in the labor market?

Answer 12

Nominal wages

Question 13

Efficiency wage theory suggest that

Answer 13

productivity might drop if the wage rate is too low

Question 14

in the wage setting relation, the nominal wage tends to decrease when unemployment benefits ___

Answer 14

decrease

Question 15

Labor productivity is represented by?

Answer 15

The ration of output to employment

Question 16

The natural level of output is the level of output that occurs when

Answer 16

the economy is operating at the employment rate consistent with both the wage - setting and price - setting equations

Question 17

The natural level of employment (N) will increase when

Answer 17

a reduction in unemployed benefits

Question 18

Suppose workers and firms expect the overall price level to increase by 5%. We would expect that the ____ wage will increase by _____ 5%

Answer 18

nominal, exactly

Question 19

Suppose the aggregate production function is given by the following: Y = AN. Labor productivity is represented by __ in the function

Answer 19

A

Question 20

What would likely cause a change in the natural rate of unemployment?

Answer 20

Changes in expected inflation

Question 21

Which situation generally exists when deflation occurs?

Answer 21

The price level is decreasing

Question 22

Suppose policy makers underestimate the natural rate of unemployment. In situations like these, policy makers likely implement policies that result in

Answer 22

a higher inflations rate than necessary

Question 23

The Philips curve show that when the unemployment rate is higher than the natural rate

Answer 23

inflation is lower than expected

Question 24

Okun’s Law shows that when the unemployment rate is above the natural rate ______

Answer 24

output is below potential

Question 25

If the output is too high, to achieve the medium run equilibrium, the central bank will

Answer 25

increase policy rate

Question 26

The zero lower bound refers to the situation that _____

Answer 26

the lowest the central bank can decrease the nominal rate is 0%

Question 27

In the short run a reduction in the price of oil will cause

Answer 27

a reduction in the inflation rate

Question 28

In the medium run, an increase in the price of oil will cause

Answer 28

an increase in the unemployed rate

Question 29

Assume that the economy is initially operating at the natural level of output. In the medium run an increase in the price of oil will cause a ____ in output and ____ in the aggregate price level

Answer 29

reduction, increase

Question 30

IN the short run an increase in the price of oil will cause

Answer 30

An increase in the inflation rate