Question 1

An increase in labour participation rate will lead to
A)a right shift in labour supply.
B)a left shift in labour supply.
C)a right shift in labour demand.
D)a left shift in labour demand.

Accepted Answer

An increase in labour participation rate means more people are willing and able to work, leading to a larger labour supply. This results in a right shift of the labour supply curve.

Question 2

A decrease in the real wage will cause an individual to increase his or her supply of labour if
A)the substitution effect is greater than the income effect.
B)the income effect is greater than the substitution effect.
C)the substitution effect is positive and the income effect is negative.
D)the substitution effect is equal to the income effect.

Accepted Answer

A decrease in real wage means the individual earns less for the same amount of work. If the income effect is greater than the substitution effect, the individual will work more to maintain their income level, thus increasing their labor supply.

Question 3

The city of Hope has a labour force of 1000.Twenty people lose their jobs each month and remain unemployed for exactly one month before finding jobs.On January 1,May 1,and September 1 of each year,50 people lose their jobs for a period of four months before finding new jobs.What is the unemployment rate in any given month?
A)2%
B)3%
C)5%
D)7%

Accepted Answer

The answer of The city of Hope has a labour...

Question 4

Frictional unemployment arises when
A)unskilled or low-skilled workers find it difficult to obtain desirable,long-term jobs.
B)labour must be reallocated from industries that are shrinking to areas that are growing.
C)workers must search for suitable jobs and firms must search for suitable workers.
D)output and employment are below full-employment levels.

Accepted Answer

Frictional unemployment occurs when workers are temporarily between jobs while searching for new ones or when firms are looking for suitable candidates.

Question 5

The city of Hope has a labour force of 1000.Twenty people lose their jobs each month and remain unemployed for exactly one month before finding jobs.On January 1,May 1,and September 1 of each year,50 people lose their jobs for a period of four months before finding new jobs.What is the average duration of an unemployment spell?
A)2.15 months
B)2.85 months
C)3.14 months
D)3.43 months

Accepted Answer

The average duration of an unemployment spell is the total number of months of unemployment divided by the total number of unemployment spells. In this case, there are 1000 people in the labor force, and 20 people lose their jobs each month. This means that there are 20 * 12 = 240 unemployment spells per year. In addition, there are 50 people who lose their jobs on January 1, May 1, and September 1 of each year, and these people remain unemployed for four months. This means that there are 50 * 3 = 150 unemployment spells per year that last for four months. Therefore, the total number of unemployment spells per year is 240 + 150 = 390. The total number of months of unemployment per year is 20 * 12 + 50 * 3 * 4 = 1200. Therefore, the average duration of an unemployment spell is 1200 / 390 = 3.077 months.

Question 6

What is the unemployment rate if there are 170 million people employed,25 million people unemployed,and 35 million not in the labour force?
A)14.7%
B)13.7%
C)12.8%
D)10.9%

Accepted Answer

The answer of What is the unemployment rate if there...

Question 7

What is the unemployment rate if there are 125 million people in the labour force,100 million people employed,and 25 million not in the labour force?
A)25%
B)20%
C)17%
D)15%

Accepted Answer

The unemployment rate is calculated as the number of unemployed people divided by the total labor force. Here, there are 25 million unemployed (125 million labor force - 100 million employed), so the unemployment rate is (25 million / 125 million) * 100 = 20%.

Question 8

Your boss has told you that you will receive an increase in your salary next year.In response to this news,you would reduce your labour supply because
A)the income effect would be equal to the substitution effect.
B)the substitution effect would be stronger than the income effect.
C)there would be an income effect but no substitution effect.
D)there would be a substitution effect,but no income effect.

Accepted Answer

An increase in salary can lead to an income effect where you feel wealthier and may choose to work less, as you can maintain the same standard of living with fewer hours.

Question 9

The less permanent an employee perceives an increase in her real wages to be
A)the smaller the income effect is and the more likely it is that the quantity of labour supplied will be increased.
B)the smaller the income effect is and the more likely it is that the quantity of labour supplied will be reduced.
C)the smaller the substitution effect is and the more likely it is that the quantity of labour supplied will be increased.
D)the smaller the substitution effect is and the more likely it is that the quantity of labour supplied will be reduced.

Accepted Answer

When an employee perceives a wage increase as less permanent, the income effect is smaller, leading them to work more to maximize earnings while the increase lasts, thus increasing the quantity of labor supplied.

Question 10

Cyclical unemployment arises when
A)unskilled or low-skilled workers find it difficult to obtain desirable,long-term jobs.
B)labour must be reallocated from industries that are shrinking to areas that are growing.
C)workers must search for suitable jobs and firms must search for suitable workers.
D)output and employment are below full-employment levels.

Accepted Answer

Cyclical unemployment occurs when there is insufficient demand for goods and services in the economy, leading to a decrease in production and employment below full-employment levels.

Question 11

The supply of labour depends primarily on
A)the marginal productivity of workers in the economy.
B)the quantity of capital that workers can work with.
C)the amount of human capital that workers can supply on the job.
D)the trade-off between labour income and leisure.

Accepted Answer

The supply of labour primarily depends on the trade-off between labour income and leisure because an increase in labour income could increase the supply of labour as workers will be willing to work more to earn higher wages. On the other hand, an increase in leisure, such as by reducing working hours, could decrease the supply of labour as workers have more time to enjoy leisure activities. Marginal productivity, quantity of capital, and human capital can also affect labour supply, but they are secondary factors compared to the trade-off between labour income and leisure.

Question 12

The country of Timbuktoo is introducing a minimum wage for the first time in its history.It is above the market-clearing wage rate for unskilled workers.The effect of the minimum wage would be to
A)reduce the equilibrium real wage rate.
B)reduce the level of output.
C)shift the labour demand curve to the right.
D)shift the labour supply curve to the left.

Accepted Answer

The minimum wage is above the market-clearing wage rate, so it will reduce the level of output.

Question 13

An increase in the real wage will cause an individual to increase his or her supply of labour if
A)the substitution effect is greater than the income effect.
B)the income effect is greater than the substitution effect.
C)the substitution effect is equal to the income effect.
D)the substitution effect is negative and the income effect is positive.

Accepted Answer

According to the substitution effect, as the real wage increases, the opportunity cost of leisure increases and individuals will substitute leisure time for work. This creates an upward slope of the labour supply curve. However, according to the income effect, as the real wage increases, individuals can afford more leisure time without sacrificing income, which creates a downward slope of the labour supply curve. If the substitution effect is greater than the income effect, the individual will increase their supply of labour as the increased wage makes leisure time more expensive relative to work.

Question 14

Your boss has told you that because of a decrease in the demand for the designer baby food your firm produces,he will have to cut everyone's salary next year to avoid layoffs.In response to this news you would
A)increase your labour supply because the income effect would be equal to the substitution effect.
B)decrease your labour supply because the substitution effect would be stronger than the income effect.
C)increase your labour supply because there would be an income effect,but no substitution effect.
D)decrease your labour supply because there would be a substitution effect,but no income effect.

Accepted Answer

When salaries are cut, the income effect suggests you might work more to maintain your income level, as there is no substitution effect in this context.

Question 15

What is the participation rate if there are 125 million people in the labour force,100 million people employed,and 25 million not in the labour force?
A)83%
B)80%
C)75%
D)67%

Accepted Answer

The participation rate is calculated as the labor force divided by the total working-age population. Here, the labor force is 125 million, and the total working-age population is 125 million (labor force) + 25 million (not in the labor force) = 150 million. So, the participation rate is (125/150) * 100 = 83%.

Question 16

Your professor has one hundred final exams to grade,so he hires you to help him grade them,paying you twice the amount you would normally receive because few students are willing to work during final exams week.You take the job.This would be an example of
A)the substitution effect being stronger than the income effect.
B)the income effect being stronger than the substitution effect.
C)a pure income effect.
D)the substitution effect being equal to the income effect.

Accepted Answer

The substitution effect is stronger because the higher pay incentivizes you to work more despite it being finals week, outweighing the income effect which might lead you to work less due to increased income.

Question 17

The skilled-bias technological change means that
A)the recent technological change has raised the productivity of highly trained or educated workers more than that of the less skilled.
B)the recent technological change has raised the real wage of highly trained or educated workers more than that of the less skilled.
C)the recent technological change has raised the real wage of women more than that of men.
D)all of the above.

Accepted Answer

Skilled-bias technological change means that technological advancements have had a greater impact on the productivity and wages of highly skilled workers compared to less-skilled workers. This is because new technologies often require specialized skills and knowledge that highly skilled workers are better equipped to handle, leading to an increase in demand and higher wages. However, this does not necessarily mean that women's wages have increased more than men's wages.

Question 18

What is the employment ratio (in percentage terms)if there are 17 million people employed,2.5 million people unemployed,and 3.5 million not in the labour force?
A)74%
B)83%
C)87%
D)100%

Accepted Answer

The employment ratio is calculated as the number of employed people divided by the total labor force (employed + unemployed) and then multiplied by 100. Here, the labor force is 17 million + 2.5 million = 19.5 million. The employment ratio is (17/19.5) * 100 = 87.18%, which rounds to 87%.

Question 19

The more permanent an employee perceives an increase in her real wages to be
A)the larger the income effect is and the more likely it is that the quantity of labour supplied will be increased.
B)the larger the income effect is and the more likely it is that the quantity of labour supplied will be reduced.
C)the larger the substitution effect is and the more likely it is that the quantity of labour supplied will be increased.
D)the larger the substitution effect is and the more likely it is that the quantity of labour supplied will be reduced.

Accepted Answer

When an employee perceives a wage increase as permanent, the income effect dominates, leading to a potential reduction in labor supply as the employee can maintain the same standard of living while working fewer hours.

Question 20

As a result of the superb economics essay that you wrote during this quarter,you win the Adam Smith prize of $100.The receipt of these funds would be an example of
A)the substitution effect being stronger than the income effect.
B)the income effect being stronger than the substitution effect.
C)a pure income effect.
D)a pure substitution effect.

Accepted Answer

The receipt of the $100 prize represents a pure income effect, as it directly increases the consumer's purchasing power and allows them to purchase more goods and services without any change in their relative prices. The substitution effect and income effect both occur when the price of a good changes, but in this scenario, the price has not changed.

Quiz 3: Productivity, output, and Employment

An increase in labour participation rate will lead to

A decrease in the real wage will cause an individual to increase his or her supply of labour if

Frictional unemployment arises when

What is the unemployment rate if there are 170 million people employed,25 million people unemployed,and 35 million not in the labour force?

What is the unemployment rate if there are 125 million people in the labour force,100 million people employed,and 25 million not in the labour force?

Your boss has told you that you will receive an increase in your salary next year.In response to this news,you would reduce your labour supply because

The less permanent an employee perceives an increase in her real wages to be

Cyclical unemployment arises when

The supply of labour depends primarily on

The country of Timbuktoo is introducing a minimum wage for the first time in its history.It is above the market-clearing wage rate for unskilled workers.The effect of the minimum wage would be to

An increase in the real wage will cause an individual to increase his or her supply of labour if

Your boss has told you that because of a decrease in the demand for the designer baby food your firm produces,he will have to cut everyone's salary next year to avoid layoffs.In response to this news you would

What is the participation rate if there are 125 million people in the labour force,100 million people employed,and 25 million not in the labour force?

Your professor has one hundred final exams to grade,so he hires you to help him grade them,paying you twice the amount you would normally receive because few students are willing to work during final exams week.You take the job.This would be an example of

The skilled-bias technological change means that

What is the employment ratio (in percentage terms) if there are 17 million people employed,2.5 million people unemployed,and 3.5 million not in the labour force?

The more permanent an employee perceives an increase in her real wages to be

As a result of the superb economics essay that you wrote during this quarter,you win the Adam Smith prize of $100.The receipt of these funds would be an example of