chapter_14_-_labor_market_and_keynesian_model

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Unformatted text preview: Page 1 of 14 Test Bank Macroeconomics: Theory and Policy Chapter 14: The Keynesian Model UCD Students: Ignore the yellow highlighted questions B. Modjtahedi Question 1 Which of the following Keynesian assumptions indicate the possibility that a free-market capitalist system could generate unemployment? A. Wage and price rigidity. B. Wage and price flexibility. C. Constant velocity of circulation. D. Volatile business investment. E. None of the above. Question 2 Which of the following is a direct reason for nominal wage rigidity? A. Menus costs B. Efficiency wages C. Coordination problem D. Sticky information. E. None of the above. Question 3 Which of the following is a direct reason for nominal wage rigidity? A. Insider-outsider problem B. Efficiency wages C. Minimum wage laws D. All of the above. E. None of the above. Question 4 Why do employers and workers enter into long-term labor contracts? A. Because it is hard to make frequent cost of living adjustments. B. Because wage negotiations are costly. C. Because future is uncertain. D. Because labor contracts secure employment over a long period of time. E. None of the above. Question 5 The insider-outsider argument indicates that? A. Workers who are unemployed and are outside the firm cause wages to fall in a recession. B. Firms offer wages to hire outsider workers that are lower than wages paid to comparable inside workers. C. Outside workers sit at negotiation tables with employers to receive wage concessions. D. Wages are negotiated between employers and workers who are employed by the firms. Workers who are unemployed have no say in wage determination. E. None of the above. Page 2 of 14 Question 6 According to the efficiency-wage hypothesis A. Employers pay wages that are higher than equilibrium wages to increase labor productivity. B. Employers pay wages that are lower than equilibrium wages to improve cost efficiency. C. Employers pay wages that are equal to equilibrium wages. This results in efficient allocation of resources. D. Employers pay wages that are equal to the price of the products times the marginal product of labor. E. None of the above. Question 7 Which of the following statements is correct? A. Prices could be rigid if firms operated in perfectly competitive markets. B. Prices could not be rigid if firms operated in monopolistically competitive markets. C. Prices could not be rigid if firms operated in perfectly competitive markets. D. Prices could be rigid if firms were price takers. E. None of the above. Question 8 Which of the following is the definition of menu costs? A. The administrative costs of changing prices by a firm. B. The costs of coordinating pricing policies with other firms....
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