Deck 17: Labor Productivity: Wages,Prices,and Employment

Question 1

Labor productivity in the base year was 20.The following year,the productivity index stood at 105.Labor productivity in the second year was:

A)5
B)20
C)21
D)105

Answer 1

C

Question 2

In year 1,an economy used 200 worker hours to produce 500 units of output.In year 2,the economy used 240 worker hours to produce 660 units of output.If year 1 is the base year,the productivity index for year 2 is:

A).10
B)1.10
C)1.25
D)1.32

Answer 2

B

Question 3

Suppose productivity stood at 5.00 in year 1,and 5.25 in year 2.If year 1 is the base year,the productivity index for year 2 is:

A)0.25
B)5
C)105
D)125

Answer 3

C

Question 4

The Bureau of Labor Statistics Index of Labor Productivity:

A)probably understates the entire economy's productivity growth
B)is calculated by dividing real GDP by the total number of worker hours
C)is calculated by dividing nominal private-sector GDP by the number of private-sector worker hours
D)is calculated by dividing real private-sector GDP by the number of private-sector worker hours

Question 5

Which of the following would not cause an increase in the BLS Index of Labor Productivity?

A)An increase in labor quality
B)An improvement in production technology
C)An increase in output per worker in the public sector
D)An increase in the quantity of physical capital

Question 6

The aggregate production function of a hypothetical economy is shown in the diagram at right.In year 1,production takes place at point R.Production at which of the following points for year 2 would indicate an unambiguous increase in labor productivity?

A)S
B)T
C)U
D)V

Question 7

Which of the following is not considered a source of increased labor efficiency?

A)Technological progress
B)Reallocation of labor from less to more productive uses
C)Changes in society's institutional and cultural setting and resulting public policies
D)Increases in the capital-labor ratio

Question 8

The average quality of labor has increased,partly because the demand for education and health care are:

A)income elastic-rising national income generates more than proportional increases in spending on these items
B)income elastic-falling national income generates more than proportional increases in spending on these items
C)income inelastic-rising national income generates more than proportional increases in spending on these items
D)income inelastic-rising national income generates less than proportional increases in spending on these items

Question 9

If nominal wages rose 1.5% and productivity increased 3% in a given year,we should expect:

A)an increase in unit labor costs and upward pressure on prices
B)an increase in unit labor costs and downward pressure on prices
C)a decrease in unit labor costs and upward pressure on prices
D)a decrease in unit labor costs and downward pressure on prices

Question 10

The critical determinants of productivity growth include all of the following except:

A)the average quality of the labor force
B)the amount of capital goods employed with each worker hour of labor
C)the efficiency with which inputs are combined
D)the extent of import restrictions

Question 11

According to evidence reported by Jorgenson,Ho,and Stiroh,the most important source of rising labor productivity over the period 1959 - 2006 was:

A)increased efficiency with which inputs are combined
B)decreases in the rate of inflation
C)improvement in the average quality of the labor force
D)increases in the amount of capital goods employed with each worker hour of labor

Question 12

Labor productivity is best defined as:

A)real GDP divided by unit labor costs
B)nominal GDP divided by the number of worker hours
C)nominal GDP divided by labor costs
D)real GDP divided by the number of worker hours

Question 13

In year 1,an economy used 200 worker hours to produce 500 units of output.In year 2,the economy used 240 worker hours to produce 660 units of output.The rate of productivity growth from year 1 to year 2 is:

A)1%
B)2%
C)3.2%
D)10%

Question 14

The secular increase in real wages resulted from increases in labor productivity:

A)that have increased the demand for labor faster than the supply of labor
B)that have increased the supply of labor faster than the demand for labor
C)that have decreased the demand for labor faster than the supply of labor
D)made possible by increased public sector output

Question 15

If real GDP falls by 2% while work hours fall by 10%,then labor productivity:

A)falls
B)is unchanged
C)rises
D)might fall,but we cannot know without more information

Question 16

Which one of the following most closely corresponds to the average annual rate of productivity growth in the United States over the past century?

A)0-1%
B)2-3%
C)4-5%
D)6-7%

Question 17

Which of the following is one of the reasons typically given for the relatively high secular growth rate of productivity for the period 1959 - 2006?

A)A three-fold increase in the capital stock
B)An increase in service sector output relative to the manufacturing sector
C)An increase in the average length of the workweek
D)An increase in the use of quotas and tariffs to protect domestic industries

Question 18

One shortcoming of the Bureau of Labor Statistics Index of Labor Productivity is that it:

A)overstates the importance of capital investments
B)fails to include part-time workers
C)double counts public sector output
D)ignores changes in the quality of output

Question 19

Which one of the following wage-productivity combinations will place the greatest upward pressure on the price level?

A)Nominal wage increase of 5%,productivity increase of 5%
B)Nominal wage increase of 4%,productivity increase of 2%
C)Nominal wage decrease of 5%,productivity increase of 5%
D)Nominal wage increase of 2%,productivity increase of 4%

Question 20

Which of the following will leave unit labor costs unchanged?

A)Nominal wages and productivity both increase by 3%
B)Nominal wages do not increase,regardless of the productivity increase
C)Real wages do not increase,regardless of the productivity increase
D)Real wages,productivity,and prices all increase by 3%

Question 21

Of the following,which country experienced the fastest rate of productivity growth over the period 2000 - 2010?

A)United States
B)Sweden
C)France
D)Germany

Question 22

An economy-wide increase in productivity caused by improved technology would most likely:

A)increase unemployment,because any given output could be produced with less labor
B)increase inflation,thereby decreasing profits and investment
C)increase output,but decrease employment
D)increase real incomes,thereby increasing aggregate demand and reducing unemployment

Question 23

Which one of the following most closely corresponds to the average annual rate of productivity growth in the U.S.for the period 1973 - 1995?

A)0-1%
B)1-2%
C)3-4%
D)5-8%

Question 24

Allowing for changes in product demand,the relationship between productivity growth and employment growth across industries over the past ten years is best described as:

A)positive
B)negative
C)"U"-shaped
D)random

Question 25

Productivity growth:

A)has been associated with rising aggregate unemployment
B)has been associated with growing aggregate employment
C)in specific industries results in growing employment in those industries
D)in specific industries results in growing unemployment in those industries

Question 26

Compared to the 1948 - 1973 period,the annual rate of productivity growth from 1974 - 1995 was approximately:

A)one fourth as much
B)one half as much
C)the same
D)twice as much

Question 27

Which of the following best describes the relationship between productivity changes and investment during a recession?

A)Unit labor costs rise,plant and equipment are utilized more,investment rises
B)Unit labor costs fall,plant and equipment are utilized more,investment rises
C)Unit labor costs fall,plant and equipment are utilized less,investment rises
D)Unit labor costs rise,plant and equipment are utilized less,investment falls

Question 28

Productivity growth:

A)falls below its trend rate in a recession and rises above it in an expansion
B)rises above its trend rate in a recession and falls below it in an expansion
C)is counter-cyclical
D)is independent of the business cycle

Question 29

Under what conditions would we expect to find the greatest growth of output and employment in a specific industry?

A)High productivity growth,price-elastic product demand,income-elastic product demand
B)High productivity growth,price-elastic product demand,income-inelastic product demand
C)Low productivity growth,price-inelastic product demand,income-inelastic product demand
D)High productivity growth,price-inelastic product demand,income-elastic product demand

Question 30

For the 1948 - 2011 period in the U.S.,the rate of productivity growth in years of declining real output was:

A)negative
B)positive
C)faster than in years of expanding real output
D)slower than in years of expanding real output

Question 31

Productivity declines may worsen recessions by causing unit labor costs to:

A)rise,thereby resulting in falling profits and lower investment spending
B)rise,thereby resulting in greater retained earnings by firms
C)fall,thereby creating incentives for government intervention
D)fall,thereby reducing consumer spending power

Question 32

Suppose that an economy's real wages and its average productivity are both increasing at a 2% annual rate.Further assume that productivity in industry X is growing at a 4% annual rate.Under what conditions might output and employment in industry X fall?

A)Price-elastic product demand
B)Price-inelastic product demand
C)The output of industry X is an inferior good
D)The output of industry X is a normal good

Question 33

Suppose demand conditions in industries X and Y are identical but that productivity increases by 5% in industry X and 2% in industry Y.If economy-wide productivity and the average wage each rise by 3%,we should expect that:

A)output and employment in X will increase relative to Y
B)output and employment in X and Y will not change relative to one another,since wages will increase by 5% in X and 2% in Y
C)output and employment in Y will increase relative to X
D)no statement can be made concerning output and employment in either industry without more information

Question 34

Suppose demand conditions in industries X and Y are identical but that productivity increases by 5% in industry X and 2% in industry Y.If economy-wide productivity and the average wage each rise by 3%,we should expect that unit labor costs will:

A)increase by the same amount in both industries,in accord with the overall increase in the average wage
B)increase in both industries,but more in industry X than industry Y
C)increase in industry X and decrease in industry Y
D)decrease in industry X and increase in industry Y

Question 35

The resurgence of U.S.productivity growth in the last half of the 1990s:

A)corresponded to a resurgence in the growth of real compensation per hour
B)contributed to rising inflationary pressures
C)was unaccompanied by rising real compensation per hour
D)contributed to the rising unemployment rate at the beginning of the new millennium

Question 36

Productivity appears to be:

A)procyclical; firms are reluctant to lay off workers in a recession,so output falls more than employment
B)procyclical; firms are quick to lay off workers in a recession,so employment falls more than output
C)countercyclical; firms are reluctant to lay off workers in a recession,so output falls more than employment
D)countercyclical; firms are quick to lay off workers in a recession,so employment falls more than output

Question 37

Suppose productivity increases by 5% in industry X and 2% in industry Y.Further suppose the demand for X has fallen while the demand for Y has increased.If economy-wide productivity and the average wage each rise by 3%,we should expect that:

A)output and employment in X will increase relative to Y
B)output and employment in X and Y will not change relative to one another,since wages will increase by 5% in X and 2% in Y
C)output and employment in Y will increase relative to X
D)no statement can be made concerning output and employment in either industry without more information

Question 38

Which one of the following most closely corresponds to the average annual rate of productivity growth in the U.S.for the period 1948 - 1973?

A)0-1%
B)1-2%
C)3-4%
D)5-8%

Question 39

Wage rates tend to change with national rather than with industry productivity because:

A)the minimum wage and other government controls prevent industry wage differentials
B)productivity differences result in product price differences,leaving real wages unchanged
C)labor supply responses tend to prevent wages from diverging in the various industries
D)labor demand responses tend to prevent wages from diverging in the various industries

Question 40

Higher than average productivity growth in industry X would be least likely lead to relative employment growth in industry X if the demand for X is:

A)both price and income inelastic
B)both price and income elastic
C)price inelastic and income elastic
D)price elastic and income elastic

Question 41

Proponents of the view that a fundamental change in the economy occurred in the late 1990s cite as evidence all of the following except:

A)heavy investment in information capital
B)the fast pace of technological progress and efficiency
C)the procyclical nature of productivity growth
D)increased spending on capital other than information capital contributed little to the acceleration in productivity

Question 42

(World of Work 17-1)Empirical studies of the productivity of public capital indicate:

A)a consensus that public capital is approximately half as productive as private capital
B)a consensus that public capital is approximately twice as productive as private capital
C)high productivity when using national data,but low productivity using state and regional data
D)high productivity when using state and regional data,but low productivity using national data