Chapter 7 exercises

Chapter 7 exercises - curve to the right 3.3 Increased...

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Chapter 7 exercises 7.1 Wage and price flexibility and full employment 1.1 Economic models that assume that wages and prices adjust freely to changes in demand and supply are known as classical models 1.2 At full employment, there are only structural and frictional employment =>1.3 During the Great Depression, there was only frictional unemployment. 1.4 There is no cyclical unemployment @ Full employment. 7.2 The production function 2.1 The production function illustrates the relationship between labor and output. 2.2 With the stock of capital fixed, output increases with labor input, but at a rate that decreases. 2.3 An increase in the stock capital shifts the production function shifts right 2.4 Diminishing returns occur when we increase both labor and capital. False 7.3 Wages and the demand and supply for labor 3.1 Labor market equilibrium occurs @ a real wage at which the quantity demanded for labor equals the quantity of supplied of labor. 3.2 An increase in the amount of capital in the economy will shift the demand for labor
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Unformatted text preview: curve to the right 3.3 Increased immigration is likely to lead to a shift in the labor-supply curve to the right 3.4 If wages and employment both fall, this is likely caused by a decrease in the demand for labor. 7.4 labor market equilibrium and full employment 4.3 The typical European works more hours per year than the typical u.s. worker. False 4.4 Another term for full-employment output is potential output . This is when the quantity of labor supplied is the same as the quantity labor demanded. 7.5 Using the full-employment model 5.2. Electricity + Internet can cause major economic fluctuations due to technological innovations. 5.4 Prescott believes that Europeans work fewer hours than Americans because taxes are higher in Europe. 7.6 Dividing output among competing demands for gdp @ full employment 6.1 When the econ operates at full employment an increase in government spending must crowd out consumption....
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