Question 1

$$\begin{array} { c c c } 
& \begin{array} { c } 
\text { Quantity of labor } \
\text { demanded } \
\text { Real wage rate } \
\text { (billions of hours } \
\text { (2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Quantity of labor } \
\text { supplied }
\end{array} \
\hline \begin{array} { c } 
\text { (billions of hours } \
\text { per year) }
\end{array} \
\hline 50 & 80 & 100 \
40 & 90 & 90 \
30 & 100 & 80 \
20 & 110 & 70 \
10 & 120 & 60
\end{array}$$ 
 $$\begin{array} { c c } 
\hline \begin{array} { c } 
\text { Employment } \
\text { (billions }
\end{array} & \text { Real GDP } \
\text { of hours } & \text { (billions of } \
\text { per year) } & \text { 2005 dollars) } \
\hline 60 & 2.0 \
70 & 3.0 \
80 & 3.7 \
90 & 4.2 \
110 & 4.5 \
\hline
\end{array}$$
-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 is

Accepted Answer

At equilibrium in the labor market, the quantity of labor demanded equals the quantity of labor supplied. The equilibrium quantity of labor is 80 billion hours, which corresponds to an employment level of 80 billion. At this level of employment, real GDP is 3.7 trillion, which is the potential GDP of the economy. We can see this from the table of real GDP, where employment of 80 billion hours corresponds to real GDP of 3.7 trillion. Therefore, the answer is choice C, $4.2 trillion.

Question 2

The unemployment rate at full employment is

Accepted Answer

The natural unemployment rate is the unemployment rate at full employment, which is the lowest level of unemployment that an economy can sustain without causing inflation. It is generally accepted as a rate between 4% and 5%. At full employment, there is still some level of unemployment due to job transitions, skill mismatches, and other structural factors, but the rate is considered to be at its lowest sustainable level.

Question 3

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 ________.

Accepted Answer

When the real wage rate exceeds the equilibrium real wage rate, it means that wages are higher than what the market or employers can afford to pay for labor. This creates a surplus of labor because there are more workers willing to offer their labor services than there are employers willing to pay for them. To reduce the surplus of labor, some workers may lower their wage demands, which would cause the real wage rate to fall. This adjustment will continue until the real wage rate equals the equilibrium level, at which point the surplus of labor will disappear.

Question 4

________ adopts the view that aggregate fluctuations are a natural consequence of an expanding economy.

Accepted Answer

The answer of ________ adopts the view that aggregate fluctuations...

Question 5

In the United States between the 1970s and the 2000s, the productivity of labor increased.This increase led to

Accepted Answer

An increase in labor productivity leads to an increase in output for each worker hired, which means that firms are able to produce more goods and services without having to hire additional workers. This ultimately increases the demand for labor, as firms will want to hire more workers to meet the increased demand for their products.

Question 6

Potential GDP

Accepted Answer

Potential GDP represents the maximum amount of output that an economy can produce when all resources are fully employed, so the correct option is A. B and C are incorrect because potential GDP can be exceeded or approached, depending on the economic conditions. Option D is incorrect because real GDP measures the value of output in constant dollars, while potential GDP is a theoretical concept. Option E is incorrect because nominal GDP measures the value of output in current dollars, while potential GDP is a measure of the economy's productive capacity.

Question 7

In a labor market without an efficiency wage, minimum wage, or union wage, when the real wage rate is less than the equilibrium real wage rate, there is a ________ of labor and the real wage rate will ________.

Accepted Answer

When the real wage rate is less than the equilibrium real wage rate, there is a shortage of labor because the quantity of labor demanded exceeds the quantity of labor supplied. As a result, the real wage rate will rise to reach equilibrium.

Question 8

$$\begin{array} { c c c } 
& \begin{array} { c } 
\text { Quantity of labor } \
\text { demanded } \
\text { Real wage rate } \
\text { (billions of hours } \
\text { (2005 dollars) }
\end{array} & \begin{array} { c } 
\text { Quantity of labor } \
\text { supplied }
\end{array} \
\hline \begin{array} { c } 
\text { (billions of hours } \
\text { per year) }
\end{array} \
\hline 50 & 80 & 100 \
40 & 90 & 90 \
30 & 100 & 80 \
20 & 110 & 70 \
10 & 120 & 60
\end{array}$$ 
 $$\begin{array} { c c } 
\hline \begin{array} { c } 
\text { Employment } \
\text { (billions }
\end{array} & \text { Real GDP } \
\text { of hours } & \text { (billions of } \
\text { per year) } & \text { 2005 dollars) } \
\hline 60 & 2.0 \
70 & 3.0 \
80 & 3.7 \
90 & 4.2 \
110 & 4.5 \
\hline
\end{array}$$
-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.

Accepted Answer

The answer of \[\begin{array} { c c c } 
&...

Question 9

Job search can be expected to decrease it

Accepted Answer

The answer of Job search can be expected to decrease...

Question 10

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

Accepted Answer

A change in unemployment benefits, such as a reduction, could decrease job search as individuals may have less financial support while searching. A positive structural change, such as an increase in job availability or better job matching, could also reduce the duration or intensity of job search.

Question 11

Which of the following explain the natural rate of unemployment?
i. job search.
ii. the Okun Gap.
iii. the production function

Accepted Answer

The natural rate of unemployment is primarily explained by job search, as individuals must search for and match with new jobs, and the production function, as factors of production determine the level of output and employment. The Okun Gap, which refers to the negative relationship between GDP growth and unemployment, is not a primary explanation for the natural rate of unemployment.

Question 12

The quantity of labor demanded definitely increases if the

Accepted Answer

When the real wage rate falls, the cost of labor decreases, making it cheaper for firms to hire more workers. As a result, the quantity of labor demanded increases. The other options may have an impact on the quantity of labor demanded, but not as directly as a change in the real wage rate.

Question 13

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Real wage rate } \
\text { (2005 dollars } \
\text { per hour) }
\end{array} & \begin{array} { c } 
\text { Quantity of labor } \
\text { demanded } \
\text { (billions of hours } \
\text { per year) }
\end{array} & \begin{array} { c } 
\text { Quantity of labor } \
\text { supplied } \
\text { (billions of hours } \
\text { per year) }
\end{array} \
\hline 40 & 200 & 320 \
35 & 220 & 310 \
30 & 240 & 300 \
25 & 260 & 290 \
20 & 280 & 280 \
15 & 300 & 270
\end{array}$$
-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.

Accepted Answer

The equilibrium real wage rate is where the quantity of labor demanded equals the quantity of labor supplied. At a real wage rate of $20, the quantity of labor demanded is 240 + 220 + 200 = 660 billion hours per year, and the quantity of labor supplied is 280 + 270 = 550 billion hours per year. At a higher wage rate, the quantity of labor demanded will decrease and the quantity of labor supplied will increase, while at a lower wage rate, the quantity of labor demanded will increase and the quantity of labor supplied will decrease. Therefore, $20 is the equilibrium wage rate and 280 is the equilibrium quantity of labor.

Question 14

Compared to the U.S.production function, the European production function is

Accepted Answer

The answer of Compared to the U.S.production function, the European...

Question 15

The natural unemployment rate is the result of

Accepted Answer

The natural unemployment rate is the result of job search and job rationing, as there will always be some level of unemployment due to the time it takes for workers to find and match with appropriate job openings, as well as the ongoing process of firms restructuring and adjusting their workforce. Bad government policies (A) may affect unemployment levels, but do not directly determine the natural rate. Insufficient demand for labor (B) can contribute to cyclical unemployment, but not necessarily the natural rate. The Lucas wedge (D) and Okun gap (E) refer to specific concepts within macroeconomics that are not directly related to the natural unemployment rate.

Question 16

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

Accepted Answer

According to the production function, the amount of real GDP produced increases when the quantity of labor employed increases, as long as the quantities of capital, land, entrepreneurship, and technology remain fixed. Changes in the inflation rate or price level do not directly affect the production level.

Question 17

The production function graphs the relationship between

Accepted Answer

The production function represents the relationship between real GDP and the quantity of labor employed. It shows the maximum output a firm can produce given a certain amount of inputs, including labor. The amount of capital or other inputs can also be shown in the production function, but the relationship between real GDP and labor is the primary focus.

Question 18

The supply of labor curve has a ________ slope because as the real wage rate rises, ________.

Accepted Answer

The supply of labor curve has a positive slope because as the real wage rate rises, the opportunity cost of leisure rises. In other words, if workers can earn a higher wage by working, they are more likely to choose work over leisure time.

Question 19

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

Accepted Answer

At the given wage rate of $35 an hour, the quantity of labor supplied is 100 billion labor hours and the quantity of labor demanded is 200 billion labor hours. This means that there is a shortage of 100 billion labor hours (demand>supply). Therefore, the correct answer is B, shortage of 100 billion hours of labor.

Question 20

When the labor market is in equilibrium, real GDP ________ potential GDP.

Accepted Answer

When the labor market is in equilibrium, it means that the economy is producing at its potential level of output, or potential GDP. Therefore, real GDP is equal to potential GDP.

Quiz 8: Potential Gdp and the Natural Unemployment Rate

The unemployment rate at full employment is

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 .

________ adopts the view that aggregate fluctuations are a natural consequence of an expanding economy.

In the United States between the 1970s and the 2000s, the productivity of labor increased.This increase led to

Potential GDP

In a labor market without an efficiency wage, minimum wage, or union wage, when the real wage rate is less than the equilibrium real wage rate, there is a of labor and the real wage rate will .

Job search can be expected to decrease it

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

Which of the following explain the natural rate of unemployment? i. job search. ii. the Okun Gap. iii. the production function