What determines the level of output in the long-run classical model?
capital, labor, productivity
Which of the following would tend to increase the natural rate of unemployment
more college graduates entering the labor force
Welfare reforms enacted in 1996 put more pressure on welfare recipients to look for work. The new law mandated cutting off benefits
the natural rate of unemployment and the unemployment rate are likely to increase
What determines the real interest rate in the long-run classical model?
savings and investment
Which of the following is a source of frictional unemployment
The time it takes to search for jobs that best matches one’s skills
Structural unemployment exists because
technological changes make the skills of the workers incompatible with the skills used on the job
The natural rate of unemployment
includes frictional and structural unemployment, is the unemployment rate that exists when the quantity of labor demanded is equal to the quantity of labor supplied
In the long run, unemployment will be at the natural state. This implies that
there is no relationship between unemployment and inflation and consequently, the Phillips curve is vertical
What does the phrase “jobless recovery” refer to?
It refers to a recovery from a recession which does not produce strong growth in employment
What determines prices and inflation in the long-run classical model?
According to the Bureau of Labor Statistics, a person who is not working and is not looking for work is
not a member of the labor force
People who are in the process of changing jobs are counted as
Which of the following 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
The labor force is made up of
those who are employed plus those who are unemployed
The natural level of employment occurs if there is no
Unemployment that results from a mismatch between worker qualifications and the characteristics employers require is called
occurs only during a recession
Which of the following reduces the duration of frictional unemployment?
establishing unemployment agencies which give out information about job vancancies
What do economists mean by the term “sticky wage”?
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
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
Which of the following individuals would not be included in the labor force
Kit, who has retired and is not looking for work
The long-run aggregate supply curve is upward sloping rather than vertical in the short run due to
The long run in macroeconomics is a period in which wages and prices are flexible and there is full market adjustment
According to Okun’s law
an increase in real GDP growth above trend, will lower unemployment
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
In general, the duration of job search will be shorter if
unemployment compensation benefits decrease
Which of the following is an example of structural unemployment
A geologist who is permanently laid off from an oil company due to a new technological advance
If the population of the united states is 260 million, the labor force is 130 million, and 120 million workers are employed,
The natural rate of unemployment
equals the sum of frictional and structural unemployment
For a given labor force, an increase in real GDP implies a decrease in unemployment.
According to classical marginal productivity, workers are paid
The value of their marginal product
Suppose that product prices start rising but nominal wages do not. In that case,
real wages will fall and firms will want to produce more because doing so will be profitable.
Consider the following: A country’s frictional unemployment rate is 3%, the natural unemployment rate is 5.5%, and the cyclical unemployment rate is 2.45. Calculate the structural unemployment rate and the unemployment rate
Structural unemployment rate = 2.5%; the unemployment rate =7.9%
Wage and price stickiness
prevents the economy from producing its potential level of real GDP
An unemployed person is
a person without a job who is actively seeking and available for work
The vertical long-run aggregate supply curve implies that shifts in aggregate
change prices only
The Philips curve implies a positive relationship between inflation and unemployment
The long-run Phillips curve shows an inverse relation between inflation and unemployment
If more people find jobs, the unemployment will definitely fall
What’s meant by the NAIRU (Natural Rate of Unemployment)?
It is the full-employment unemployment rate, it is the unemployment rate at which there is only frictional and structural unemployment, it is the unemployment rate at which the labor market has fully adjusted