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The city of Hope has a labor 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%

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If Jeff's wage rate rises,he decides to work fewer hours.From this,we can infer that


A) for Jeff,the substitution effect is greater than the income effect.
B) for Jeff,the substitution effect is equal to the income effect.
C) for Jeff,the substitution effect is less than the income effect.
D) Jeff is a nitwit.

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The two main characteristics of the production function are


A) it slopes downward from left to right,and the slope becomes flatter as the input increases.
B) it slopes upward from left to right,and the slope becomes steeper as the input increases.
C) it slopes upward from left to right,and the slope becomes flatter as the input increases.
D) it slopes downward from left to right,and the slope becomes steeper as the input increases.

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Suppose the natural rate of unemployment is 5%,with full-employment output of $7000 billion.Use Okun's Law to calculate the level of national output if the unemployment rate is 7%.

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The output level form of Okun's law tell...

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An increase in the real wage would result in a


A) movement along the labor demand curve,causing an increase in the number of workers hired by the firm.
B) shift of the labor demand curve,causing an increase in the number of workers hired by the firm.
C) movement along the labor demand curve,causing a decrease in the number of workers hired by the firm.
D) shift of the labor demand curve,causing a decrease in the number of workers hired by the firm.

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A permanent increase in the real wage rate has a ________ income effect on labor supply than a temporary increase in the real wage,so labor supply is ________ with a permanent wage increase than for a temporary wage increase.


A) larger; more
B) larger; less
C) smaller; more
D) smaller; less

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Changes in the capital stock occur ________,and changes in the amount of labor that firms employ occur ________.


A) quickly; quickly
B) slowly; slowly
C) slowly; quickly
D) quickly; slowly

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The fact that the production function relating output to capital becomes flatter as we move from left to right means that


A) the marginal product of labor is positive.
B) the marginal product of capital is positive.
C) there is diminishing marginal productivity of labor.
D) there is diminishing marginal productivity of capital.

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In the production function Y = AF(K,N) ,total factor productivity is


A) Y/A.
B) A)
C) K/N.
D) Y/N.

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What two factors should you equate in deciding how many workers to employ?


A) The marginal product of labor and the marginal product of capital
B) The marginal product of labor and the real wage rate
C) The marginal product of labor and the real interest rate
D) The marginal product of capital and the real wage rate

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A favorable supply shock would


A) shift the production function up and decrease marginal products at every level of employment.
B) shift the production function down and decrease marginal products at every level of employment.
C) shift the production function down and increase marginal products at every level of employment.
D) shift the production function up and increase marginal products at every level of employment.

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The tendency of workers to supply more labor in response to a larger reward for working is called the ________ of a higher real wage on the quantity of labor supplied.


A) homogeneous labor supply effect
B) negative correlation effect
C) income effect
D) substitution effect

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Assuming that the growth rate of full-employment output is 3%,and that the actual unemployment rate fell 2 percentage points in the last year,Okun's Law predicts that output growth rate over the past year was


A) -1%
B) 3%
C) 5%
D) 7%

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Economists often treat the economy's capital stock as fixed because


A) labor is a more important factor of production than capital,so economists ignore capital.
B) it takes a long time for new investment and the scrapping of old capital to affect the overall quantity of capital.
C) there is very little capital in the economy compared with the amount of labor.
D) unless the interest rate changes,the capital stock doesn't change.

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Because of diminishing marginal productivity


A) the labor supply curve is not vertical.
B) nominal wages are sticky in a downward direction.
C) the labor demand curve is negatively sloped.
D) households save only a small share of their income.

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How many people are unemployed if the employment ratio is 75%,there are 90 million people employed,and there are 20 million people not in the labor force?


A) 20 million
B) 10 million
C) 5 million
D) 0 million

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Suppose the marginal product of labor in the economy is given by MPN = 0.002(16,000 - N),while the supply of labor is 1000 + 1000w. (a)Find the market-clearing real wage rate and level of employment. (b)What happens to the wage rate and employment if wealth rises,reducing the supply of labor to 500 + 1000w? (c)What happens to the wage rate and employment if after wealth has risen as in part (b), there is a productivity shock that increases the marginal product of labor to MPN = 0.0025(16,000 - N)?

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(a)The market-clearing real wage rate eq...

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1) Suppose the marginal product of labor is MPN = 200 - 0.5N Where N is aggregate employment.The aggregate quantity of labor supplied is 300 + 8w,where w is the real wage.What is the equilibrium real wage?


A) 1
B) 2
C) 3
D) 4

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A bird flu epidemic causes many people to flee the country,but does not affect labor demand Significantly because almost all the goods produced within the country are exported.What happens to current employment and the real wage rate?


A) Both employment and the real wage rate would increase.
B) Both employment and the real wage rate would decrease.
C) Employment would increase and the real wage would decrease.
D) Employment would decrease and the real wage would increase.

Correct Answer

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A mathematical expression relating the amount of output produced to quantities of capital and labor utilized is the


A) real interest rate.
B) productivity relation.
C) production function.
D) marginal product.

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