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econ104 midterm2-practice.pdf

econ104 midterm2-practice.pdf - Note This question set does...

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1 Note: This question set does NOT contain any question from the actual midterm. You should always review the textbook, the lecture slides and assignment questions. Give yourself an hour to attempt all questions and then read through the answer key. 1. Which of the following best defines the natural rate of unemployment? a. It is the unemployment rate that would prevail with zero inflation. b. It is the rate associated with the highest possible level of GDP. c. It is the difference between the long-run and short-run unemployment rates. d. It is the amount of unemployment that the economy normally experiences. 2. Cyclical unemployment is closely associated with which of the following? a. long-term economic growth b. short-run ups and downs of the economy c. fluctuations in the natural rate of unemployment d. seasonal fluctuations in spending 3. Nancy is searching for a job that suits her tastes about where to live and the people she works with. Laura is looking for a job that makes best use of her skills. Contrast Nancy and Laura’s natures of unemployment. a. Nancy and Laura are both frictionally unemployed. b. Nancy and Laura are both structurally unemployed. c. Nancy is frictionally unemployed, and Laura is structurally unemployed. d. Nancy is structurally unemployed, and Laura is frictionally unemployed. 4. Which of the following is most likely to cause frictional unemployment? a. the minimum wage b. a worker leaving a job to find one with better benefits c. labour unions d. an increase in the income tax 5. When a union bargains successfully with employers, what happens to quantity of labour supplied and demanded in that industry? a. Both the quantity of labour supplied and the quantity of labour demanded increase. b. Both the quantity of labour supplied and the quantity of labour demanded decrease. c. The quantity of labour supplied increases and the quantity of labour demanded decreases. d. The quantity of labour supplied increases the quantity of labour demanded decreases. 6. What impact do employment insurance and unions have on unemployment? a. Unemployment insurance and unions both create structural unemployment. b. Unemployment insurance and unions both create frictional unemployment. c. Unemployment insurance creates frictional unemployment and unions create structural unemployment. d. Unemployment insurance creates structural unemployment and unions create frictional unemployment. 7. Samantha, the CEO of a corporation operating in Uganda, decides to raise the wages of her workers, even though she faces an excess supply of labour. Which of the following is an expected result from her decision? a. It will increase productivity, according to the efficiency wage theory. b. It will help eliminate the excess supply of labour if she raises it sufficiently.
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