Suppose the marginal product of labor is mpn 200 05 n

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44. Suppose the marginal product of labor is MPN=200 – 0.5Nwhere Nis aggregate employment. The aggregate quantity of labor supplied is 300 +8w, where wis the real wage. If a supply shock increases the marginal product of labor by 10 (to MPN=210 – 0.5 N), by how much does employment increase? (a) 0 (b) 4 (c) 8 (d) 16 Answer: D Level of difficulty: 3 Section: 3.4 45. A tremendous flood along the Mississippi River destroys thousands of factories, reducing the nation’s capital stock by 5%. What happens to current employment and the real wage rate? 46. A sharp increase in stock prices makes people much wealthier. If the main effect of this increased wealth is felt on labor supply, what happens to current employment and the real wage rate?
42 Abel/Bernanke • Macroeconomics, Fifth Edition 47. An adverse oil-price shock reduces labor demand. What happens to current employment and the real wage rate? 48. The equilibrium level of employment, achieved after the complete adjustment of wages and prices, is known as the (a) zero-unemployment level of employment. (b) natural state. (c) invisible handshake. (d) full-employment level of employment. Answer: D Level of difficulty: 1 Section: 3.4 49. Full-employment output is the level of output that firms in the economy supply when 50. What is the unemployment rate if there are 150 million people employed, 25 million people unemployed, and 25 million not in the labor force?

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