macro95ex11 - Chapter 11 Keynesianism: The Macroeconomics...

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Chapter 11 Keynesianism: The Macroeconomics of Wage and Price Rigidity T Multiple Choice Questions 1. Keynesians are skeptical of the classical theory that recessions are periods of increased mismatch between workers and jobs because (a) help-wanted advertising falls during recessions. (b) help-wanted advertising rises during recessions. (c) workers spend a lot of time searching for work in recessions. (d) people are indifferent between being employed or not. Answer: A Level of difficulty: 1 Section: 11.1 2. The gift exchange motive suggests that (a) workers value benefits like health insurance more than job security. (b) workers prefer a nice work environment, even if they must accept lower wages. (c) workers who feel well treated will work harder and more efficiently. (d) workers will shirk if they are paid a low wage. Answer: C Level of difficulty: 1 Section: 11.1 3. A model in which workers won’t be concerned about the possibility of being fired if they don’t work hard, because their wage is so low, is called (a) a cost-benefit model. (b) a job-stress model. (c) a gift-exchange model. (d) a shirking model. Answer: D Level of difficulty: 1 Section: 11.1
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Chapter 11 Keynesianism: The Macroeconomics of Wage and Price Rigidity 167 4. According to the efficiency wage model, firms will pay the real wage that (a) maximizes workers’ marginal productivity. (b) maximizes the marginal productivity of capital and the marginal productivity of labor together. (c) maximizes effort per dollar of real wage. (d) minimizes hiring and training costs to the firm. Answer: C Level of difficulty: 1 Section: 11.1 5. Assuming no change in the effort curve of employees, the efficiency wage model implies that (a) the real wage is rigid and equals the efficiency wage. (b) the real wage exceeds the marginal productivity of labor. (c) an increase in the marginal productivity of capital will increase the real wage. (d) the real wage is procyclical. Answer: A Level of difficulty: 2 Section: 11.1 6. A firm faces the following relationship between the real wage it pays and the effort exerted by its workers. Real Wage Effort ( E ) 10 20 11 24 12 27 13 29 The marginal product of labor for this firm is given by MPN = E (100 – N )/9. The firm will choose to pay a wage such that the effort level is (a) 20. (b) 24. (c) 27. (d) 29. Answer: C Level of difficulty: 2 Section: 11.1
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168 Abel/Bernanke • Macroeconomics, Fifth Edition 7. A firm faces the following relationship between the real wage it pays and the effort exerted by its workers. Real Wage Effort ( E ) 10 20 11 24 12 27 13 29 The marginal product of labor for this firm is given by MPN = E (100 – N )/9. How many workers will the firm employ? (a) 96 (b) 92 (c) 88 (d) 80 Answer: A Level of difficulty: 3 Section: 11.1 8. In the efficiency wage model with the efficiency wage above the market-clearing wage, the level of employment depends on (a) the intersection of labor supply and labor demand.
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macro95ex11 - Chapter 11 Keynesianism: The Macroeconomics...

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