Practice 10 marley and scrooge find that the costs of

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Practice10.Marley and Scrooge find that the costs of screening, hiring, and training workers is substantial. Toreduce labor turnover, they pay higher-than-average wages. Their behavior is consistent with theexplanation of unemployment.(a)minimum wage(b)efficiency wage(c)imperfect information(d)cost effectivenessANSWER: (b)Refer to p. 265 [577] for more on efficiency wage theory.
11.If, due to imperfect information, firms set the wage above the market-clearing level,
12.Refer to the diagram used in Question 2 above. If the government imposed a minimum wage of $4,
OBJECTIVE 4:Use theAS/ADmodel to explain the Phillips Curve and the short-run trade-off between theunemployment rate and the inflation rate as it appeared in the 1950s and 1960s and to explain whythe relationship collapsed after that.
Chapter 14 [29]: The Labor Market in the Macroeconomy 103same single factor—the level of demand. The analysis rested on the fact that theAScurve had been fairlystable. In the 1970s and 1980s, supply-side factors (particularly the price of imported oil and inflationaryexpectations) became more volatile and the stable inflation-unemployment relationship collapsed.Higherprices for imported inputs shifted theAScurve to the left; similarly, as the inflationary expectations ofworkers and producers increased, wages and prices were increased in response, pushing theAScurve to theleft and disrupting the Phillips Curve relationship. (page 266 [578])

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Term
Fall
Professor
Mr. Kemmerer

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