Deck 13: Technological Progress: the Short, the Medium, and the Long Run

Question 1

Suppose workers' and firms' expectations of the price level and productivity are accurate.In this case,an increase in productivity will cause which of the following?

A)an increase in both the real wage and the natural rate of unemployment
B)a decrease in both the real wage and the natural rate of unemployment
C)an increase in the real wage and no change in the natural rate of unemployment
D)a decrease in the real wage and an increase in the natural rate of unemployment
E) none of the above

Answer 1

an increase in the real wage and no change in the natural rate of unemployment

Question 2

Assume an economy experiences,for a given period,a 1% increase in output and a 5% increase in productivity.Given this information,we know that which of the following occurred for this economy during this period?

A)The unemployment rate increased during this period.
B)The unemployment rate decreased during this period.
C)The unemployment rate did not change during this period.
D)The effects on the unemployment rate are ambiguous.
E) none of the above

Answer 2

The unemployment rate increased during this period.

Question 3

The evidence suggests that recent technological change

A)permanently increased the natural rate of unemployment.
B)is different from past technological change, in that it has no impact on productivity.
C)has increased productivity in the service sector only.
D)has increased productivity in the manufacturing sector only.
E) has increased the wage gap between skilled and unskilled workers.

Answer 3

has increased the wage gap between skilled and unskilled workers.

Question 4

An increase in productivity will cause which of the following according to the price-setting behavior of firms?

A)a reduction in prices set by firms
B)an increase in the real wage paid by firms
C)a reduction in the markup set by firms
D)all of the above
E) none of the above

Question 5

Because of labor hoarding,an increase in output may signal

A)an increase in employment.
B)a reduction in employment.
C)no change in employment.
D)a reduction in productivity.

Question 6

When the production function is represented by Y = NA,labor productivity is represented by which of the following expressions?

A)1 / A
B)NA
C)A / Y
D)Y / A
E) none of the above

Question 7

Which of the following statements about the United States during the twentieth century is correct?

A)Output growth has been approximately equal to employment growth.
B)Output growth has been slower than employment growth.
C)Output growth has been faster than employment growth.
D)Output has increased largely due to monetary and fiscal policy.
E) Output has decreased largely due to monetary and fiscal policy.

Question 8

Some believe that technological progress leads to higher unemployment in the medium run.This claim that technological progress results in an increase in unemployment in the medium is supported by

A)economic theory, but contradicted by the evidence.
B)theory and evidence.
C)the evidence, but contradicted by theory.
D)neither theory nor evidence.
E) none of the above

Question 9

Suppose an economy experiences an increase in technological progress.This increase in technological progress will

A)allow more output to be produced with the same number of workers.
B)allow the same amount of output to be produced with fewer workers.
C)lead to changes in the types of goods produced.
D)all of the above
E) none of the above

Question 10

For this question,assume productivity has been increasing by 5% per year.Also assume that workers' expectations of productivity growth adjust slowly over time.For this economy,a reduction in productivity growth from 5% to 2% will most likely cause which of the following to occur?

A)an increase in the natural rate of unemployment
B)a reduction in the real wage
C)an increase in the markup over labor costs
D)all of the above
E) none of the above

Question 11

The empirical evidence suggests that periods of high productivity growth will cause which of the following in the short run?

A)higher markups
B)lower unemployment
C)constant real wages
D)greater equality in wages
E) none of the above

Question 12

For this question,assume that firms' of productivity are accurate while workers' expectations of productivity adjust slowly over time.In this case,an increase in productivity will cause which of the following?

A)an increase in both the real wage and the natural rate of unemployment
B)a decrease in both the real wage and the natural rate of unemployment
C)an increase in the real wage and a reduction in the natural rate of unemployment
D)a decrease in the real wage and an increase in the natural rate of unemployment
E) none of the above

Question 13

The number of workers employed will not change as a result of an increase in productivity when which of the following occurs?

A)The AS curve shifts downward.
B)Output growth exceeds productivity growth.
C)Productivity growth is equal to output growth.
D)The AD curve shifts to the right.
E) none of the above

Question 14

When the unemployment rate is on the horizontal axis and the real wage is on the vertical axis,an increase in productivity will cause which of the following to occur?

A)The wage-setting and price-setting curves will both shift downward.
B)The wage-setting and price-setting curves will both shift upward.
C)The price-setting curve to shift downward, and no shift in the wage-setting curve.
D)The wage-setting curve to shift upward, and the price-setting curve to shift downward.
E) The wage-setting curve to shift downward, and the price-setting curve to shift upward.

Question 15

A major explanation for the decline in employment projected in textiles is

A)increases in income.
B)social problems in the U.S.
C)shifts in production toward low-wage countries.
D)inaccurate expectations about productivity growth.
E) inaccurate expectations about the price level.

Question 16

Assume an economy experiences,for a given period,a 4% increase in output and a 4% increase in productivity.Given this information,we know that which of the following occurred for this economy during this period?

A)The unemployment rate increased during this period.
B)The unemployment rate decreased during this period.
C)The unemployment rate did not change during this period.
D)The effects on the unemployment rate are ambiguous.
E) none of the above

Question 17

Based on price setting behavior,which of the following will cause an increase in the price level?

A)a reduction in productivity
B)an increase in the nominal wage
C)an increase in the markup
D)all of the above
E) none of the above

Question 18

Assume an economy experiences,for a given period,a 4% increase in output and a 2% increase in productivity.Given this information,we know that which of the following occurred for this economy during this period?

A)The unemployment rate increased during this period.
B)The unemployment rate decreased during this period.
C)The unemployment rate did not change during this period.
D)The effects on the unemployment rate are ambiguous.
E) none of the above

Question 19

Based on our understanding of the wage setting equation,which of the following will not cause a reduction in the nominal wage?

A)an increase in unemployment
B)a reduction in the expected price level
C)a reduction in expected productivity
D)all of the above
E) none of the above

Question 20

Technological unemployment is a macroeconomic phenomenon that occurs when

A)unemployment changes due to the effects of technology in high-technology industries.
B)unemployment changes due to the effects of monetary and fiscal policy in the New Economy.
C)hysterisis.
D)Eurosclerosis.
E) unemployment changes as a result of technological change.

Question 21

For this question,assume that expectations of productivity growth adjust slowly.Now,suppose that there is a 3% reduction in productivity.Explain how this 3% reduction in productivity can cause changes in the unemployment rate.

Question 22

For this question,assume expectations of P and A are correct.Now suppose that there is a 3% reduction in A.Given this information,which of the following will occur?

A)The PS relation will shift up by 2%.
B)The WS relation will shift down by less than 2%.
C)The WS relation will shift down by 2%.
D)There will be no change in the real wage.

Question 23

For this question,assume that expectations of P and A are correct.Now suppose that there is a 1% increase in A.Given this information,which of the following will occur?

A)a 1% increase in the real wage and a reduction in the natural rate of unemployment
B)a 1% increase in the real wage and no change in the natural rate of unemployment
C)no change in the real wage and an increase in the natural rate of unemployment
D)no change in the real wage and a reduction in the natural rate of unemployment

Question 24

Which of the following represents the wage setting relation when changes in labor productivity are allowed to occur?

A)W = PᵉF(u,z)
B)W = P(1 + m)
C)W = PᵉF(u,z)/ A
D)W = AP / (1 + m)
E) none of the above

Question 25

For this question,assume that expectations of productivity are slow to adjust.Further assume that A had been increasing by 6% a year.Now suppose that A only increases by 2% in period t.This slowdown in productivity growth will cause

A)the PS relation to shift up more than the WS relation.
B)the WS relation to shift up more than the PS relation.
C)the natural rate of unemployment to fall.
D)the real wage to fall.

Question 26

There are some concerns that technological progress can lead to an increase in unemployment.Explain the two related but separate dimensions of technological progress.

Question 27

For this question,assume that expectations of productivity are slow to adjust.An increase in productivity growth from 1% to 3% will cause

A)an increase in the real wage of 1% and an increase in un.
B)an increase in the real wage of 1% and a reduction in un.
C)an increase in the real wage of 3% and an increase in un.
D)an increase in the real wage of 3% and a reduction in un.

Question 28

Because of labor hoarding,a reduction in output may signal

A)an increase in employment.
B)a reduction in employment.
C)no change in employment.
D)a reduction in productivity.

Question 29

Joseph Schumpeter argued that growth was a process of creative destruction.Explain what is meant by the phrase,"creative destruction."

Question 30

Among the reasons that the poor countries have been unable to close the "technology gap" with the rich countries is

A)poorly established property rights.
B)poorly developed financial markets.
C)low education levels.
D)all of the above
E) none of the above

Question 31

For this question,assume that expectations of P and A are correct.Based on price setting behavior,the real wage will be equal to which of the following?

A)A / (1 + m)
B)AP / (1 + m)
C)APF(u,z)
D)P(1 + m)
E) none of the above

Question 32

Suppose the aggregate production function is represented by Y = AN.Which of the following expressions represents the number of additional workers required to increase production by one unit?

A)1 / A
B)Y / N
C)1 / N
D)1 / Y
E) none of the above

Question 33

Which of the following is not believed to cause recent increases in wage inequality?

A)international trade
B)contractionary monetary policy
C)skill-biased technological progress
D)all of the above
E) none of the above

Question 34

For this question,assume that expectations of P and A are correct.Now suppose that there is a 4% increase in A.Given this information,which of the following will occur?

A)The PS relation will shift up by 4%.
B)The WS relation will shift up by less than 4%.
C)The WS relation will shift down by 4%.
D)The PS relation will shift down by 4%.

Question 35

For this question,assume that the aggregate production function is represented by Y = A.Which of the following represents the marginal cost of producing an additional unit of output?

A)W
B)W / A
C)A / W
D)(1 +A)W

Question 36

When was the last year that GDP per capita in North Korea was approximately equal to GDP per capita in South Korea?

A)1950
B)1970
C)1990
D)2000
E) none of the above

Question 37

Based on price setting behavior,which of the following will cause a reduction in the price level?

A)an increase in productivity
B)a reduction in the nominal wage
C)a reduction in the markup
D)all of the above
E) none of the above

Question 38

For this question,assume that the aggregate production function is represented by Y = AN.Which of the following represents the price setting relation for this economy?

A)(1 + m)A
B)(1 + m)A / W
C)(1 + m)W
D)W / A
E) none of the above

Question 39

For this question,assume that expectations of productivity are slow to adjust.Further assume that A had been increasing by 2% a year.Now suppose that A increases by 5% in period t.This increase in productivity growth will cause

A)the real wage to rise and no change in the natural rate of unemployment.
B)the WS relation to shift up more than the PS relation.
C)the natural rate of unemployment to fall.
D)the real wage to fall.

Question 40

For this question,assume that expectations of productivity growth adjust slowly.Now,suppose that there is a 5% increase in productivity.Explain how this 5% increase in productivity can cause changes in the unemployment rate.

Question 41

Explain some of the causes of increased wage inequality.

Question 42

In recent years,real wages of the least educated workers

A)have increased faster than the real wages of college-educated workers.
B)have increased, but by less than the real wages of college-educated workers.
C)have decreased, but by less than the real wages of college-educated workers.
D)have decreased, while the real wages of college-educated workers have increased.
E) have decreased at about the same rate as the real wages of college-educated workers.

Question 43

Suppose workers' and firms' expectations of the price level and productivity are accurate.In this case,a reduction in productivity will cause which of the following?

A)a decrease in both the real wage and the natural rate of unemployment
B)an increase in both the real wage and the natural rate of unemployment
C)a decrease in the real wage and no change in the natural rate of unemployment
D)an increase in the real wage and a decrease in the natural rate of unemployment
E) none of the above

Question 44

Some commentators will argue that increases in productivity may have no effect or even a negative effect on employment in the short run.Explain what must occur for an increase in productivity to have no effect or even a negative effect on employment in short run.

Question 45

Assume an economy experiences,for a given period,a 5% increase in output and a 1% increase in productivity.Given this information,we know that which of the following occurred for this economy during this period?

A)The unemployment rate increased during this period.
B)The unemployment rate decreased during this period.
C)The unemployment rate did not change during this period.
D)The effects on the unemployment rate are ambiguous.
E) none of the above

Question 46

Suppose the aggregate production function is represented by the following: Y = AN.Given this information,labor productivity is given by

A)Y)
B)N / A.
C)A / N.
D)A)
E) none of the above

Question 47

Explain how technological change can cause changes in wage inequality.

Question 48

First,explain each of the following: hysterisis and Eurosclerosis.Second,explain how each of them can be used to explain the relatively high natural rate of unemployment in Europe.

Question 49

In recent years,the increasing relative wage of skilled labor has been mostly due to

A)a decrease in the supply of skilled labor that exceeds the decrease in demand.
B)an increase in the demand for skilled labor that exceeds the increase in supply.
C)a decrease in the supply of, and increase in the demand for, skilled labor.
D)government laws promoting the hiring of skilled labor.
E) government subsidies provided to college students.

Question 50

Which of the following is not true about technological progress?

A)allow for the production of a larger quantity of goods using the same number of workers
B)lead to the production of new goods
C)lead to the disappearance of old goods
D)cause a reduction in employment in the short run
E) none of the above

Question 51

Assume an economy experiences an increase in productivity that occurs as a result of the more efficient use of existing technologies.Given this information,we would expect which of the following to occur?

A)aggregate demand would not change
B)aggregate demand would shift to the right
C)aggregate demand would shift to the left
D)both the aggregate demand and aggregate supply curves would shift to the left

Question 52

Based on price setting behavior,which of the following will cause a reduction in the price level?

A)an increase in productivity
B)a reduction in the nominal wage
C)a reduction in the markup
D)all of the above
E) none of the above

Question 53

Which of the following would increase the gap in wages between skilled and unskilled workers?

A)less technological progress of the kind we've experienced in the past 15 years
B)new types of production technology that require workers to have more skills
C)an increase in the costs of going to college
D)all of the above
E) none of the above

Question 54

Since 1971,the annual growth rate of real wages has been

A)remarkably high.
B)positive, but low.
C)zero.
D)negative.
E) impossible to measure accurately, and so has not been reported.

Question 55

Explain what effect a reduction in productivity has on wage setting behavior,price setting behavior,the equilibrium real wage,the natural rate of unemployment,and the natural level of output.

Question 56

Suppose an economy experiences a reduction in productivity.Explain both the short-run and medium-run effects of this reduction in productivity on output,employment,and the unemployment rate.

Question 57

Suppose an economy experiences an increase in productivity.Explain both the short-run and medium-run effects of this increase in productivity on output,employment,and the unemployment rate.

Question 58

For this question,assume that workers expectations of the price level and productivity are accurate.Now suppose that the economy experiences an increase in productivity.Which of the following will occur in the medium run?

A)no change in unemployment
B)an increase in unemployment
C)a reduction in unemployment
D)no change in the natural level of output if the unemployment rate does not change
E) none of the above

Question 59

Assume an economy experiences an increase in productivity that occurs as a result of a more widespread implementation of a major technological breakthrough.Given this information,we would expect which of the following to occur?

A)aggregate demand would not change
B)aggregate demand would shift to the right
C)aggregate demand would shift to the left
D)both the aggregate demand and aggregate supply curves would shift to the left

Question 60

When the unemployment rate is on the horizontal axis and the real wage is on the vertical axis,a reduction in productivity will cause which of the following to occur?

A)The wage-setting and price-setting curves will both shift downward.
B)The wage-setting and price-setting curves will both shift upward.
C)The price-setting curve to shift downward, and no shift in the wage-setting curve.
D)The wage-setting curve to shift upward, and the price-setting curve to shift downward.
E) The wage-setting curve to shift downward, and the price-setting curve to shift upward.

Question 61

"Churning" refers to

A)changes in the real wage over the business cycle.
B)changes in the markup over the business cycle.
C)structural change associated with technological progress.
D)the increase in productivity caused by an increase in output.
E) the increase in output caused by an increase in productivity.

Question 62

Assume expectations of both prices and productivity are accurate,use the PS / WS relations,graphically illustrate and explain the effects of an increase in the productivity on the natural rate of unemployment.

Question 63

Suppose an economy is characterized by the equations below:
Price setting: P= (1 + m)(W / A)
Wage setting: W=AP(1 - u)
Solve for the natural rate of unemployment if the markup (m)is equal to 4%.

Question 64

Assume expectations of prices are correct but expectations of productivity adjust slowly.Use the PS / WS relations,graphically illustrate and explain the effects of a decrease in productivity growth on the natural rate of unemployment.