A rise in the minimum wage will tend to __________ the demand for labor and ___________ the supply of labor. decrease; increase b. increase;…

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1.A rise in the minimum wage will tend to __________ the demand for labor and ___________ the supply of labor. 

a. decrease; increase

b. increase; decrease

c. decrease; decrease

d. increase; increase  

2. Over the past 25 years in the United States, the annual inflation rate has averaged approximately ______. 


b. 3%

c. 15%

d. 6%  

3. People are most likely to revert to bartering in periods of 

a. stagflation.

b. deflation.

c. recession.

d. hyperinflation.  

4. A recession that is especially long and deep is known as a __________.    

5. The ________________ wage is the wage above equilibrium that firms voluntarily pay to increase productivity and profits.    

6. The average number of times per year the money supply changes hands is known as _________________.    

7. Who believed that fluctuations in the business cycle were the result of class conflicts between labor and capital? 

a. Schumpeter

b. Marx

c. Rousseau

d. Keynes  

8. High cyclical unemployment is associated with 

a. economic downturns.

b.new tariffs or trade agreements.

c. transitional periods in which employees find better jobs.

d. times of prosperity and growth in real GDP.  

9. Which of the following cases is an example of structural unemployment? 

a. An accountant quits her job to become an investment banker.

b. An auto worker is fired for poor job performance.

c. A wheat farmer, whose income has plummeted because of a new trade agreement, quits farming and starts looking for a new job.

d. A consultant is laid off because poor economic conditions have depressed the market for consultants.  

10. The government is most likely to intervene when _____________ unemployment rises sharply.

a. structural

b. frictional

c. seasonal

d. cyclical  

11. In 1998, ______________________ were over 8 times more likely to be unemployed as white adult males. 

a. black females

b. black teenagers

c. white teenagers

d. female Hispanics  

12. Many economists theorize that the non-accelerating inflation rate of unemployment has declined over time. Which of the following factors could economists use to help explain why the NAIRU fell? 

a. Decreased immigration

b. The transition away from a service economy toward an agricultural economy

c. The lingering effects of the spikes in oil prices

d. The decreased percentage of teenagers in the labor force  

13. Negotiations between labor union representatives and the management of a firm are called 

a. strikes.

b. collective bargaining.

c. legally binding arbitration.

d. rent-seeking behavior.  

14. Right-to-work laws 

a. shift power away from firms by permitting the formation of unions.

b. permit unions to bargain for “no-loss” negotiations, i.e., contracts in which the firms agree not to fire any union members without cause.

c. give employers the right to disband labor unions.

d. make it illegal for an employer to require union membership as a condition of employment.  

15. Which of the following is an accurate explanation of the wage-price spiral? 

a. When labor costs rise, it causes a self-perpetuating form of cost-push inflation.Higher prices cause workers to demand higher wages.

b. The higher wages raise production costs, which must be passed along to the consumer in the form of further price increases.

c. When one firm pays the efficiency wage, it raises the opportunity cost for all other workers in the industry, necessitating raises for workers in competitive firms.

d. Workers in periods of hyperinflation demand to be paid in the form of goods, rather than cash, which further devalues the currency.  

16. Which of the following pairs of economic concepts are usually associated with each other? 

a. Stagflation and cost-push inflation

b. Stagflation and demand-pull inflation

c. Economic expansion and cost-push inflation

d. Stagflation and the wage-price spiral  

17.The Y variable in the formula for the quantity theory of money stands for

a. the total output of the economy.

b. the price level.

c. the money supply.

d. the equilibrium intersection of supply and demand.  

18. A price index in one year was 120. The next year the same index was 140. What was the approximate percentage change in the price level as measured by that price index? 

a. 12%

b. 17%

c. 20%

d. 40%  

19. Which of the following statements about contractions is true? 

a. Significant or prolonged contractions are called booms.

b. A contraction usually follows a trough in the business cycle.

c. Contractions are periods when the real GDP grows slower than the trend.

d. The government usually does not have a part in moderating the business cycle when a contraction is occurring.  

20. If an employer pays an efficiency wage, 

a. worker turnover will increase.

b. worker health may be adversely affected.

c. worker quality may be adversely affected.

d. unemployment may increase.  

21. The lowest rate of unemployment that does not create inflationary pressure is called the 

a. NERU: Non-Expansionary Rate of Unemployment

b. MUR: Minimal Unemployment Rate

c. NAIRU: Non-Accelerating Inflation Rate of Unemployment

d. NRU: Natural Rate of Unemployment  

22. The Marxian view of the business cycle is that economic fluctuations occur because 

a. capitalism must increase the rate of exploitation of workers in order to increase profits.

b. consumers are not spending enough to stimulate growth in the economy.

c. the government does not have enough planning to be able to stop the cycles.

d. “creative destruction” forces major changes in the composition of the economy.  

23. Which of the following correctly expresses the quantity theory of money?

a. money × the price level = velocity × real output

b. money × velocity = price level × real output

c. velocity × real output = price level × money

d. price level × velocity = real output  

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