FNCE 5151 SUMMER 2017 NAME: Iftakher Hossain

THIRD ASSIGNMENT
DUE ON OR BEFORE 6/26/2017
EACH QUESTION WORTH 1.61 POINTS

1) Applied to perfectly competitive labor markets, the marginal principle tells firms to hire workers until
A) the marginal revenue product of the last worker hired equals the wage.
B) marginal productivity begins to diminish.
C) average total costs are minimized.
D) the price of the product equals the wage of the worker.

2) The market demand curve for labor is the relationship between the wage and the quantity of labor
that
A) all workers are willing to provide.
B) any given worker is willing to provide.
C) all firms are willing to employ.
D) any given firm is willing to employ.

3) The input-substitution effect of an increase in the wage comes about because higher wages
A) increase production costs, and final good prices will rise, reducing the quantity demanded of the
product.
B) increase production costs, and final good prices will rise, increasing the quantity demanded of the
product.
C) make labor less expensive as an input, leading firms to switch to labor as an input.
D) make labor more expensive as an input, leading firms to switch to other inputs.

4) The short-run labor demand curve is

A) more elastic than the long-run labor demand curve.
B) less elastic than the long-run labor demand curve.
C) either more or less elastic than the long-run labor demand curve.
D) perfectly elastic (horizontal).

5) The long-run labor demand curve is

A) more elastic than the short-run labor demand curve.
B) less elastic than the short-run labor demand curve.
C) either more or less elastic than the short-run labor demand curve.
D) perfectly elastic (horizontal).

6) The price of an hour of leisure time is

A) the income that could have been earned in that hour.
B) zero.
C) the minimum wage rate.
D) determined by the value of the activity the person engages in during that hour of leisure.

7) According to the substitution effect of labor supply, when the wage rate goes up
A) it becomes more costly to consume leisure, so people will work more.
B) it becomes less costly to consume leisure, so people will work more.
C) the opportunity cost of enjoying leisure goes down.
D) firms will hire more workers since people are more willing to work.

8) The market supply of labor curve is

A) upward sloping.
B) upward sloping if the income effect dominates and downward sloping if the substitution effect
dominates.
C) downward sloping if the income effect dominates and upward sloping if the substitution effect
dominates.
D) perfectly inelastic.

9) An equilibrium in the labor market is a situation in which

A) there is no pressure for wages to change.
B) there is no unemployment.
C) wages exceed minimum wage.
D) marginal revenue product equals the wage.

10) If the wage paid to workers increases, the labor demand curve
A) will not shift.
B) shifts to the left and fewer workers are hired.
C) shifts to the right and more workers are hired.
D) shifts to the right and fewer workers are hired.

11) Suppose the wage rate in a certain industry falls, yet firms hire fewer workers. The best explanation
of this is that labor
A) demand fell.
B) demand increased.
C) supply fell.
D) supply increased.

Figure 10.3

12) In Figure 10.3 a decrease in the supply of labor will cause the equilibrium
A) wage and hours of labor used to increase.
B) wage and hours of labor used to decrease.
C) wage to increase and hours of labor used to decrease.
D) wage to decrease and hours of labor used to increase.

13) In Figure 10.3 an increase in the demand for labor will cause the equilibrium
A) wage and hours of labor used to increase.
B) wage and hours of labor used to decrease.
C) wage to increase and hours of labor used to decrease.
D) wage to decrease and hours of labor used to increase.

14) A minimum wage that is less than the prevailing market wage will
A) have no effect on the market.
B) increase unemployment.
C) increases wages.
D) reduce wages.

15) Raising the minimum wage would

A) help some workers while hurting others.
B) help all workers and hurt all firms.
C) hurt all workers and help some consumers.
D) help workers and help consumers.

16) One reason that professional baseball players earn higher incomes than college professors is that
A) the training costs to enter the baseball profession are low.
B) there no barriers to entry in the baseball profession.
C) few people have the skill to play professional baseball.
D) being a college professor requires less education.

17) The difference in wages between college graduates and high school graduates
A) has increased in recent years.
B) is smaller than in the past.
C) is nonexistent when labor markets are in equilibrium.
D) has been stable for several decades.

18) The unionization rate of private sector workers is about

A) 8.2%.
B) 12.5%.
C) 35.5%.
D) 37.7%.

19) If a union is successful in increasing wages, it may find that

A) the demand for workers falls.
B) the demand for workers increases.
C) the price of union-made goods falls.
D) the demand for union-made goods rises.

20) Government taxes and transfers

A) increase the wealth of the poorest Americans and reduce the wealth of the richest Americans.
B) reduce the wealth of all Americans.
C) increase the wealth of all Americans.
D) reduce the wealth of the poorest Americans and increase the wealth of the richest Americans.

21) Fluctuations in economic performance is one of the two basic issues of macroeconomics. The other
is
A) tracking unemployment.
B) keeping interest rates in check.
C) long-run economic growth.
D) monitoring inflation rates.

22) The value of all final goods and services produced during a given time period measures a nation's
A) gross domestic product.
B) net national product.
C) consumer price index.
D) net exports.

23) Gross domestic product calculations count only final goods and services because
A) these are the only goods and services that are purchased in an economy.
B) counting all goods and services would lead to double-counting of many activities.
C) it is difficult to measure the prices of intermediate goods produced.
D) one cannot calculate the quantities of intermediate goods produced.

24) "Final goods and services" are those that are

A) produced outside the United States.
B) used in the production of other goods and services.
C) double counted in the calculation of GDP.
D) sold to ultimate or final purchasers.

25) Which of the following is NOT a component of gross domestic product?

A) net exports
B) government purchases
C) purchases by consumers of used goods
D) purchases by consumers of finished goods

26) The largest component of GDP is

A) government spending.
B) consumption expenditures.
C) private investment expenditures.
D) net exports.

27) What is the fastest growing component of consumption in the United States?
A) new home construction
B) nondurable goods
C) durable goods
D) services

28) Gross investment is

A) what is left over from total new private investment after depreciation.
B) the total amount of private investment purchases, whether new or previously existing.
C) the total amount of new private investment purchases.
D) the wear and tear on private investment.

29) Depreciation is
A) what is left over from total new private investment after use for a year.
B) the total amount of private investment purchases, whether new or previously existing.
C) the total amount of new private investment purchases.
D) the wear and tear on private investment.

30) The majority of spending in the category of government purchases comes from
A) the federal government.
B) state and local governments.
C) transfer payments.
D) military spending.

31) Social Security payments are examples of

A) nondurable goods.
B) durable goods.
C) services.
D) transfer payments.

32) A nation's net exports consist of

A) its exports plus its imports.
B) its exports minus its imports.
C) its exports plus all other nation's imports.
D) its imports plus all other nation's exports.

33) The GDP equation is

A) Y = C + I + G + NX.
B) Y = C - I - G - NX.
C) C + I = G + NX.
D) C + I = Y + G + NX.

34) Which of the following is a category of national income?

A) net interest
B) corporate profits
C) rental income
D) all of the above

35) When GDP is measured in "current prices" it is known as the

A) real GDP.
B) nominal GDP.
C) real GNP.
D) nominal GNP.

36) "Recession" refers to a period when real GDP in the economy

A) declines for at least six months.
B) suffers due to political instability.
C) grows rapidly.
D) experiences a rise in living standards.

37) One of the flaws of GDP is that it

A) includes only transactions that take place in formal businesses.
B) ignores transactions that do not take place in organized markets.
C) includes measures of the underground economy.
D) includes measures of changes of quality of life associated with producing output.

38) Economists define the unemployed as individuals who are

A) not currently working.
B) not currently working but are actively looking for work.
C) working but looking for a different job.
D) working less than their desired amount of time.

39) The unemployment rate is the number of unemployed people

A) divided by the number of people who are working.
B) divided by the total working-age population.
C) divided by the sum of the number of people who are working and the number of people who are
looking for work.
D) and the number of people working fewer than their desired number of hours, divided by the number
of people who are working or looking for work.

40) People who are currently not working but are actively looking for work are officially classified as
A) unemployed and in the labor force.
B) unemployed and out of the labor force.
C) employed and in the labor force.
D) employed and out of the labor force.

41) People who are only working part-time, but want to be working full-time, are classified officially as
A) unemployed and in the labor force.
B) unemployed and out of the labor force.
C) employed and in the labor force.
D) employed and out of the labor force.

42) The fraction of the working-age population that is in the labor force is called the
A) employment rate.
B) unemployment rate.
C) labor force participation rate.
D) nonresponse rate.

43) People who want to work but have stopped looking for work because they could not find jobs after
actively searching are called
A) employed.
B) unemployed.
C) discouraged workers.
D) empowered
44) Unemployment that naturally occurs during the normal workings of an economy as people change
jobs and move across the country is called
A) natural unemployment.
B) frictional unemployment.
C) structural unemployment.
D) cyclical unemployment.

45) Steel workers laid off from their jobs as the result of a recession are considered
A) structurally unemployed.
B) cyclically unemployed.
C) frictionally unemployed.
D) seasonally unemployed.

46) At full employment the unemployment rate equals the

A) cyclical unemployment rate.
B) structural unemployment rate.
C) structural unemployment rate plus the cyclical unemployment rate.
D) structural unemployment rate plus the frictional unemployment rate.

47) Economists say that the economy is at "full employment" when the
A) structural unemployment rate is zero.
B) total unemployment rate is zero.
C) frictional unemployment rate is zero.
D) cyclical unemployment rate is zero.

48) The natural rate of unemployment

A) can vary over time and will differ across countries.
B) can vary over time but tends to be the same across countries.
C) tends to remain constant over time but at different levels for different countries.
D) tends to remain constant over time and is the same across countries.

49) the cost of living is the

A) Producer Price Index.
B) Consumer Price Index.
C) the GDP deflator.
D) the chain-weighted price index.

50) What does the Consumer Price Index (CPI) measure?

A) prices of durable goods
B) prices of non durable goods
C) the cost of living over time
D) the cost of replacing lost items

51) The biggest problem caused by a deflation is that

A) prices fall.
B) wages fall.
C) people cannot repay their debts.
D) interest rates rise.

52) The mechanism that normally coordinates what goes on in an economy is the
A) government.
B) price system.
C) stock market.
D) Federal Reserve.

53) In modern economies

A) all prices are very flexible.
B) some prices are very flexible while others are not.
C) no prices are very flexible.
D) prices become less flexible as they increase.

54) The relationship between the level of prices and the total demand for all goods and services is
known as
A) aggregate supply.
B) market supply.
C) aggregate demand.
D) market demand.

55) One reason the aggregate demand curve is downward sloping is because of the
A) interest rate effect.
B) welfare effect.
C) price effect.
D) tariff effect.

56) The purchasing power of money decreases as the

A) production decreases.
B) price level increases.
C) employment increases.
D) demand increases.

57) The relationship between consumer spending and income is known as the
A) rate of income.
B) consumption function.
C) inflation rate.
D) rate of individual wealth.

58) The multiplier represents the ratio of the total shift in aggregate demand to the
A) total shift in short-run aggregate supply.
B) initial shift in short-run aggregate supply.
C) initial shift in aggregate demand.
D) total shift in long-run aggregate supply.

59) The marginal propensity to save (MPS) is the

A) amount of saving that is later consumed.
B) fraction of additional income that is saved.
C) part of consumption spending that does not depend on income.
D) total amount of income that is saved.

60) If the MPC = 0.9, the multiplier would be

A) 0.1.
B) 2.
C) 9.
D) 10.

Figure 14.2

61) Refer to Figure 14.2. A movement from point a to point c could be caused by a(n)
A) increase in government spending.
B) decrease in the price of oil.
C) increase in taxes.
D) increase in short-run aggregate supply.

62) Refer to Figure 14.2. A movement from point a to point b could be caused by a(n)
A) increase in government spending.
B) decrease in the price of oil.
C) decrease in taxes.
D) decrease in short-run aggregate supply.