Question 1

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.

Accepted Answer

The real wages of the least educated workers have generally decreased or stagnated, while the real wages of college-educated workers have continued to increase, reflecting a growing wage gap influenced by factors such as technological advancements and globalization.

Question 2

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

Accepted Answer

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

Question 3

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

Accepted Answer

The answer of For this question,assume that workers expectations of...

Question 4

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

Accepted Answer

Labor productivity is often defined as output per worker. In the given aggregate production function Y = AN, where Y is the total output, A represents productivity (or technology factor), and N is the number of workers (labor), labor productivity is represented by A. This is because A directly influences the output per worker, indicating how productive each worker is given the level of technology or productivity factor.

Question 5

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.

Accepted Answer

Since the question is asking about the growth rate of real wages, which takes inflation into account, a negative growth rate means that wages have not kept up with inflation and have effectively decreased in value over time. This is in line with the trend of increasing income inequality and stagnant wages for the majority of workers in the United States.

Question 6

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.

Accepted Answer

Labor hoarding occurs when companies retain more employees than needed, expecting future increases in demand. Thus, even if output decreases, employment levels may not change immediately as firms hold onto their workforce.

Question 7

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

Accepted Answer

All the statements A, B, C, and D are true about technological progress. Therefore, none of the statements is NOT true.

Question 8

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
E)1 / W

Accepted Answer

The marginal cost of production is the additional cost incurred when producing one more unit of output. In this case, since the production function is given as Y = A, we can assume that the cost of producing one unit of output is W/A (since Y/A = W/A). Therefore, the marginal cost of producing an additional unit of output would be W/A, which is the same as choice B.

Question 9

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

Accepted Answer

According to the classical wage theory, in the long run, nominal wages adjust to equalize the supply and demand of labor, which results in a real wage rate that is equal to the marginal product of labor. Assuming that expectations of P and A are correct, the price setter will set the nominal wage equal to the expected marginal product of labor, which is A. The real wage is the nominal wage divided by the price level, i.e., A/P. Therefore, using the formula for the markup, we have P = (1 + m)A/P, which can be rearranged to A/P = 1/(1+m). Hence, the real wage will be A/(1+m).

Question 10

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

Accepted Answer

The answer of Which of the following represents the wage...

Question 11

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

Accepted Answer

All the options listed contribute to increasing the wage gap between skilled and unskilled workers. Technological progress and new production technologies increase demand for skilled labor, raising their wages relative to unskilled workers. An increase in the costs of going to college makes it harder for people to acquire skills, thus widening the wage gap.

Question 12

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

Accepted Answer

Contractionary monetary policy is a tool used by central banks to control inflation by increasing interest rates, which can have short-term negative effects on employment and economic growth. However, it is not believed to be a significant factor in recent increases in wage inequality. International trade and skill-biased technological progress have both been identified as major drivers of wage inequality.

Question 13

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

Accepted Answer

The unemployment rate did not change during this period because the increase in output was offset by the increase in productivity.

Question 14

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

Accepted Answer

If productivity increases by 5% but output only increases by 1%, it suggests that less labor is needed to produce the output, potentially leading to higher unemployment.

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 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

Accepted Answer

A 4% increase in output with a 2% increase in productivity suggests that more labor was likely employed to achieve the additional output, leading to a decrease in the unemployment rate.

Question 16

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

Accepted Answer

The price setting relation in an economy typically involves the price level (P), wages (W), productivity (A), and possibly a markup (m). However, none of the options provided correctly represents a standard price setting relation based on the given aggregate production function Y = AN. The price setting relation would involve how firms set prices based on costs (like wages) and productivity, often with a markup, but none of the options accurately reflect this in a standard economic model.

Question 17

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

Accepted Answer

An increase in productivity due to a technological breakthrough would lead to a decrease in the cost of production, such as labor and materials. As a result, firms would be able to produce more output at a lower cost, which would shift the aggregate supply curve to the right. This increase in output would lead to an increase in GDP, employment, and income, which would shift the aggregate demand curve to the right. Therefore, we would expect aggregate demand to shift to the right.

Question 18

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

Accepted Answer

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

Question 19

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.

Accepted Answer

Labor hoarding means that firms hold on to their employees even when there is a decrease in demand for their products or services. As a result, an increase in output may not necessarily require an increase in employment because the firm may already have the necessary number of workers to meet the increased demand. Therefore, there is no change in employment despite the increase in output.

Question 20

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.

Accepted Answer

The increasing relative wage of skilled labor is primarily due to an increase in demand that exceeds the increase in supply. This could be due to factors such as technological advancements and globalization, which require more specialized skills, and a shift towards a knowledge-based economy.

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

In recent years,real wages of the least educated workers

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?

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?

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

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

Because of labor hoarding,a reduction in output may signal

Which of the following is NOT true about technological progress?

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?

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?

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

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

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

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?

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?

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?

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?

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?

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?

Because of labor hoarding,an increase in output may signal

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