Question 1

Assume that expectations of P and A are correct. Based on the wage- setting behaviour, the real wage will be equal to which of the following?

Accepted Answer

The answer of Assume that expectations of P and A...

Question 2

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:

Accepted Answer

The answer of Assume that expectations of productivity are slow...

Question 3

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

Accepted Answer

The answer of Suppose the aggregate production function is represented...

Question 4

Which of the following is not true about technological progress?

Accepted Answer

Technological progress may cause a decrease in unemployment in the long run, but in the short run, new technologies often displace workers, which can lead to temporary unemployment. Therefore, option C is not true.

Question 5

Assume that the aggregate production function is represented by Y = AN. Which of the following represents the marginal cost of producing an additional unit of output?

Accepted Answer

The formula for the marginal cost of producing an additional unit of output in terms of the production function Y=AN is MC = W/MPN, where MPN is the marginal product of labor with respect to N. Since N does not appear in the given production function, we can rewrite it as Y=AN^1 where MPN=dY/dN=A. Thus, MC = W/MPN = W/A.

Question 6

Which of the following institutional arrangements foster economic growth?

Accepted Answer

All of the above options are institutional arrangements that can foster economic growth. A judicial system that resolves disputes creates a stable environment for businesses to operate and invest in. An anti-trust body scrutinising market competition prevents one or a few large companies from monopolising the market and stifling competition, which ultimately limits innovation and economic growth. A political system that protects its citizens ensures that their rights and property are secure, which encourages investment and job creation. All of these institutional arrangements promote economic growth when they function effectively together.

Question 7

Which of the following represents the broad definition of good institutions for economic growth?

Accepted Answer

Protection of property rights is a key element in a broad definition of good institutions for economic growth as it provides individuals and businesses with the confidence to invest and grow their businesses, knowing that their property and intellectual assets can be protected. While patriotism, heavy punishments, tax incentives, and regulated markets may play a role in economic growth, they are not as essential as property rights protection.

Question 8

Assume that expectations of productivity are slow to adjust. An increase in productivity growth from 2% to 5% will cause:

Accepted Answer

The answer of Assume that expectations of productivity are slow...

Question 9

Assume that expectations of productivity growth adjust slowly over time. For this economy, a decrease in productivity will most likely cause which of the following to occur?

Accepted Answer

Since expectations of productivity growth adjust slowly, a decrease in productivity is likely to lead to a decrease in output and hence, an increase in the natural rate of unemployment. The decrease in productivity may also lead to an increase in the markup over labour costs, but it is not a certain outcome. The real wage may decrease, but it is not a necessary consequence.

Question 10

Assume that the aggregate production function is represented by Y = AN. Which of the following represents the price- setting relation for this economy?

Accepted Answer

The price-setting relation in this economy is represented by the markup pricing equation, which is (1 + m)(W/A), where W is the wage rate and m is the markup. This equation implies that the price level depends on the markup and the real wage rate (i.e. the wage rate adjusted for productivity). Choice D is the only option that represents this equation.

Question 11

Suppose an economy experiences an increase in productivity. The AD curve will most likely shift to the right when this increase in productivity is the result of which of the following?

Accepted Answer

The answer of Suppose an economy experiences an increase in...

Question 12

A decrease in productivity will cause which of the following to occur in the labour market model?

Accepted Answer

A decrease in productivity will cause both the wage-setting and price-setting curves to shift downward. This is because a decrease in productivity means that firms can produce less output with the same amount of inputs, which means that they are willing to pay less for labor and charge more for their products.

Question 13

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

Accepted Answer

The last year that GDP per capita in North Korea was approximately equal to GDP per capita in South Korea was around 1970. After the Korean War, both Koreas had similar economic sizes, but South Korea began to rapidly industrialize in the 1960s and 1970s, while North Korea's growth slowed, leading to the significant economic disparities seen today.

Question 14

Because of labour hoarding, a reduction in output may signal:

Accepted Answer

Labour hoarding occurs when firms keep more workers on their payroll than they require to produce their current level of output. This may be due to various reasons such as a lack of willingness to lay off workers or an expectation of future increase in demand. In such a scenario, a reduction in output does not necessarily lead to a decrease in employment as firms may choose to retain their workers. However, the reduction in output means that each worker is producing less, resulting in a lower productivity level. Therefore, a reduction in output signals a decrease in productivity (Choice D).

Question 15

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 economy?

Accepted Answer

An increase in productivity suggests that output per worker has increased. With a 4% increase in output, this means that there must have been an increase in employment as well, in order to produce the additional output. Therefore, employment has increased during this period.

Question 16

Assume that the production function for an economy is represented by Y = AN. Which of the following expressions is equal to labour productivity for this economy?

Accepted Answer

Labour productivity is defined as output per unit of labor, which in this case is represented by Y/N. Given the production function Y = AN, dividing both sides by N gives Y/N = A, indicating that A represents labor productivity in this context.

Question 17

Which of the following is believed to cause recent increases in wage inequality?

Accepted Answer

Skill-biased technological progress has led to an increase in demand for skilled workers, which has caused their wages to increase relative to those of unskilled workers. The weakening of trade unions has also resulted in a decline in their ability to negotiate on behalf of workers and protect their wages, exacerbating the inequality. Therefore, both A and C have contributed to recent increases in wage inequality.

Question 18

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 run is supported by:

Accepted Answer

Economic theory generally suggests that technological progress can lead to job displacement in the short term but tends to create new jobs and increase productivity in the medium to long term. Empirical evidence does not consistently support the claim that technological progress leads to higher unemployment in the medium run.

Question 19

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 6% in period t. This increase in productivity growth will cause:

Accepted Answer

The answer of Assume that expectations of productivity are slow...

Question 20

The evidence suggests that recent technological change:

Accepted Answer

There is evidence to suggest that recent technological change has increased the wage gap between skilled and unskilled workers. This is because technological change has increased demand for skilled workers who are able to operate and maintain new technologies, while reducing demand for unskilled workers who are easily replaced by machines. This has led to an increase in the wage gap between these two groups of workers. The other choices (A, C, D, and E) are incorrect because they do not accurately reflect the evidence.

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

Assume that expectations of P and A are correct. Based on the wage- setting behaviour, the real wage will be equal to which of the following?

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:

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

Which of the following is not true about technological progress?

Assume that the aggregate production function is represented by Y = AN. Which of the following represents the marginal cost of producing an additional unit of output?

Which of the following institutional arrangements foster economic growth?

Which of the following represents the broad definition of good institutions for economic growth?

Assume that expectations of productivity are slow to adjust. An increase in productivity growth from 2% to 5% will cause:

Assume that expectations of productivity growth adjust slowly over time. For this economy, a decrease in productivity will most likely cause which of the following to occur?

Assume that the aggregate production function is represented by Y = AN. Which of the following represents the price- setting relation for this economy?

Suppose an economy experiences an increase in productivity. The AD curve will most likely shift to the right when this increase in productivity is the result of which of the following?

A decrease in productivity will cause which of the following to occur in the labour market model?

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

Because of labour hoarding, a reduction in output may signal:

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 economy?

Assume that the production function for an economy is represented by Y = AN. Which of the following expressions is equal to labour productivity for this economy?

Which of the following is believed to cause recent increases in wage inequality?

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 run is supported by:

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 6% in period t. This increase in productivity growth will cause:

The evidence suggests that recent technological change: