A. True B. False. Answer Key: True Question 5 of / 1.0 Points The natural rate of unemployment

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1 Question 1 of 36 Wage and price stickiness A.give rise to a vertical long run aggregate supply curve. B.give rise to a vertical short run aggregate supply curve. C.creates a surplus or a shortage of real GDP. D.prevents the economy from producing its potential level of real GDP. Question 2 of 36 The vertical long run aggregate supply curve implies that shifts in aggregate demand will, in the long run, A.change output and prices B.change interest rates C.change prices only D.change nothing Question 3 of 36 The natural rate of unemployment includes frictional and structural unemployment. is equal to zero when an economy is producing at a point on its production possibilities frontier. is the unemployment rate that exists when the quantity of labor demanded is equal to the quantity of labor supplied. A.I, II, and III B.I and II only C.I and III only D.II and III only Question 4 of 36 The long run in macroeconomics is a period in which wages and prices are flexible and there is full market adjustment. A. True B. False Answer Key: True Question 5 of 36 The natural rate of unemployment

2 A.decreases during recessions. B.equals the sum of frictional and cyclical unemployment. C.equals the sum of frictional and structural unemployment. D.is always less than full employment rate of unemployment. Question 6 of 36 Cyclical unemployment A.occurs even when an economy is producing at a point on its production possibilities frontier. B.occurs only during a recession. C.tend to occur when an economy experiences inflation. D.is a part of an economy's natural rate of unemployment. Question 7 of 36 Suppose that product prices start rising but nominal wages do not. In that case, A.real wages will fall and firms will want to produce more because doing so will be profitable. B.real wages will rise and firms will want to produce more because doing so will be profitable. C.there will be a surplus of goods and services produced. D.there will be a shortage of goods and services produced. Question 8 of 36 The long run aggregate supply curve is upward sloping (rather than vertical) in the shortrun due to A.sticky wages B.sticky employment C.sticky interest rates D.sticky output Question 9 of / 1.0 Points In the long run, unemployment will be at the natural rate. This implies that A.there is a one to one relationship between unemployment and inflation and consequently, the Phillips curve is vertical. B.there is no relationship between unemployment and inflation and consequently, the Phillips curve is vertical. C.there is a positive relationship between unemployment and inflation and consequently, the Phillips curve is upward sloping.

3 D.there is a negative relationship between unemployment and inflation and consequently, the Phillips curve is downward sloping. Question 10 of 36 Which of the following is a source of wage stickiness? fixed wage contracts minimum wage laws workers and firms want to avoid complexity of negotiating contracts frequently A.I only B.I and II only C.I and III only D.I, II, and III Question 11 of 36 According to the Bureau of Labor Statistics, a person who is not working and is not looking for work is A.considered unemployed. B.considered underemployed. C.counted as a "not currently working" member of the labor force. D.not a member of the labor force. Question 12 of 36 The labor force is made up of A.all individuals who are employed. B.those who are employed plus those who are unemployed. C.the population of a nation, aged 16 years and above. D.all individuals who are working and those who are not working. Question 13 of 36 What determines the the real interest rate in the long run classical model? A.aggregate supply and demand B.money supply and demand C.savings and investment D.inflation Question 14 of 36

4 The natural level of employment occurs if there is no A.unemployment. B.frictional unemployment. C.structural employment. D.cyclical unemployment. Question 15 of 36 What determines prices and inflation in the long run classical model? A.money supply B.aggregate demand and supply C.interest rates D.saving and investment Question 16 of 36 Consider the following: A country's frictional unemployment rate is 3%, the natural unemployment rate is 5.5%, and the cyclical unemployment rate is 2.4%. Calculate the structural unemployment rate and the unemployment rate. A.structural unemployment rate = 3%; the unemployment rate = 7.9% B.structural unemployment rate = 2.5%; the unemployment rate = 7.9% C.structural unemployment rate = 2.5%; the unemployment rate = 5.4% D.structural unemployment rate = 2.4%; the unemployment rate = 5.4% Question 17 of 36 Which of the following reduces the duration of frictional unemployment? A.retraining unemployed workers to equip them with new skills B.subsidizing firms that are willing to train new entrants in the labor market C.establishing employment agencies which give out information about job vacancies D.establishing labor unions which will protect workers from being laid off. Question 18 of 36 In general, the duration of job search will be shorter if A.less job market information is available. B.it is more costly to obtain job search information. C.there are fewer employment agencies. D.unemployment compensation benefits decrease.

5 Question 19 of 36 A number of semi skilled workers in an industry find themselves out of work when improvements in technology render their jobs obsolete. These workers experience A.transitional unemployment. B.technological unemployment. C.structural unemployment. D.frictional unemployment. Question 20 of 36 Welfare reforms enacted in 1996 put more pressure on welfare recipients to look for work. The new law mandated cutting off benefits after a certain length of time. Which of the following is likely to occur as a result of this provision? A.the natural rate of unemployment and the unemployment rate are likely to increase. B.the natural rate of unemployment is likely to decrease, but the unemployment rate is likely to increase. C.the natural rate of unemployment is not affected, but the unemployment rate is likely to increase. D.the natural rate of unemployment is not affected, but the unemployment rate is likely to fall. Question 21 of 36 Which of the following individuals would not be included in the labor force? A.Kit, who lost his job some time ago and has not looked for work in the last 30 days B.Divy, who is on temporary layoff from General Motors. C.Soraya, a recent college graduate, who does not have a job, but has applied for several in the last week. D.Giles, a physician who chooses to work part time. Question 22 of 36 According to classical marginal productivity theory, workers are paid A.a real wage B.the value of their time C.the value of their marginal product D.the value of total output

6 Question 23 of 36 Structural unemployment exists because A.workers may not be willing to accept jobs at the going wage rate. B.of fluctuations in economic activity. C.technological changes make the skills of the workers incompatible with the skills used on the job. D.it takes time for people seeking jobs and employers seeking workers to find each other. Question 24 of 36 What does the phrase "jobless recovery" refer to? A.It refers to a recovery from a recession which does not produce strong growth in employment. B.It refers to a situation in which rising productivity has made it possible for firms to reduce their workforce and increase output at the same time. C.It refers to the phenomenon where U.S. firms move their production abroad, thereby destroying jobs in the domestic market and creating new jobs in foreign markets. D.It refers to a situation in which a worker's real wage falls despite increases in productivity. Question 25 of 36 The SR Phillips curve implies a positive relationship between inflation and unemployment. A. True B. False Answer Key: False Question 26 of 36 What do economists mean by the term "sticky wage"? A.It refers to the reluctance by employers to increase nominal wages during an inflationary period. B.It refers to a wage that is slow to adjust to its equilibrium level, creating sustained periods of shortage or surplus in the labor market. C.It refers to a breakdown in wage negotiations between employers and employee unions. D.It refers to a union negotiated wage.

7 Question 27 of 36 What determines the level of output in the long run classical model? A.aggregate demand B.capital, labor, productivity C.interest rates D.prices Question 28 of 36 Which of the following is an example of structural unemployment? A.An autoworker who is temporarily laid off from an automobile company due to a decline in sales. B.A geologist who is permanently laid off from an oil company due to a new technological advance. C.A worker at a fast food restaurant who quits work and attends college. D.A real estate agent who leaves a job in Texas and searches for a similar, higher paying job in California. Question 29 of 36 An unemployed person is A.one who is eligible to work but chooses not to work. B.one who is not working. C.a person without a job who is actively seeking and available for work. D.one who can only find jobs that are below his abilities. Question 30 of 36 Unemployment that results from a mismatch between worker qualifications and the characteristics employers require is called unemployment. A.cyclical B.frictional C.search D.structural Question 31 of 36 For a given labor force, an increase in real GDP implies a decrease in unemployment. A. True B. False

8 Answer Key: True Question 32 of 36 Which of the following statements is true of the economy in the long run? In the long run, real GDP eventually moves to potential because all wages and prices are assumed to be flexible. the economy can achieve its natural level of employment and potential output at any price level. there is no cyclical unemployment. A.I only B.I and II only C.I and III only D.I, II, and III Question 33 of 36 Which of the following is a source of frictional unemployment? A.a downturn in economic activity B.discrimination in the labor market C.the time it takes to search for jobs that best matches one's skills D.outsourcing Question 34 of / 1.0 Points If the population of the United States is 260 million, the labor force is 130 million, and 120 million workers are employed, the rate of unemployment is A.7.7% B.8.3% C.3.85% D.53.9% Question 35 of 36 According to Okun's law A.an increase in inflation above trend, will lower unemployment B.an increase in real gdp growth above trend, will lower unemployment C.an increase in interest rates, above trend, will lower unemployment D.an increase in real gdp growth, above trend, will lower inflation Question 36 of 36

9 People who are in the process of changing jobs are counted as A.frictionally unemployed. B.underemployed. C.structurally unemployed. D.cyclically unemployed.