1.One of the tenets of the classical view of the labour market is that the wage adjustments that are necessary to clear the labour market occur:
1.very infrequently.
2.slowly.
3.quickly.
4.instantly.
2.The classical view of the labour market is basically consistent with the assumption of __________ aggregate supply curve.
1.an upward-sloping
2.a horizontal (or almost horizontal)
3.a downward-sloping
4.a vertical (or almost vertical)
3.Those who hold the classical view of the labour market are likely to believe that:
1.monetary, but not fiscal policy will have an effect on output and employment.
2.both monetary and fiscal policy will have an effect on output and employment.
3.neither monetary nor fiscal policy will have an effect on output and employment.
4.Fiscal, but not monetary policy will have an effect on output and employment.
4.According to the classical economists, those who are not working:
1.are unable to find a job at the current wage rate.
2.have chosen not to work at the market wage.
3.have given up looking for a job, but would accept a job at the current wage if one were offered to them.
4.are too productive to be hired at the current wage.
5.The natural rate of unemployment is generally thought to be the sum of:
1.frictional unemployment and cyclical unemployment.
2.frictional unemployment and structural unemployment.
3.cyclical unemployment and structural unemployment.
4.frictional unemployment and seasonal unemployment.
6.In the long run, the Phillips curve will be vertical at the natural rate of unemployment if:
1.the long-run aggregate demand curve is vertical at potential GDP.
2.the long-run aggregate supply curve is vertical at potential GDP.
3.the long-run supply curve is horizontal at the natural rate of inflation.
4.the long-run aggregate demand curve is horizontal at the natural rate of inflation.
7.The measured unemployment rate can be pushed below the natural rate, but:
1.only in the short run, and not without inflation.
2.only in the long run, and not without inflation.
3.only in the short run, and only if the price level is constant.
4.only in the long run, and only if the price level is constant.
8.Potential GDP is the level of aggregate output:
1.that can be sustained in the long run without inflation.
2.that can be sustained in the long run, if the inflation rate is zero.
3.that can be produced at a zero unemployment rate.
4.that can be produced if structural unemployment is zero.
9.Which school of economic thought suggested that one possible cause of inflation was a 'push' from the cost side?
1.New classical economists.
2.Marxists.
3.Monetarists.
4.Keynesians.
10.The Phillips curve indicates that there is a:
1.positive relationship between the inflation rate and the employment rate.
2.negative relationship between the inflation rate and labour demand.
3.positive relationship between labour supply and the inflation rate.
4.negative relationship between the inflation rate and the unemployment rat
11.The Phillips curve is a graph showing the relationship between:
1.the inflation rate and the unemployment rate.
2.the price level and the unemployment rate.
3.the level of aggregate output and the price level.
4.the inflation rate and the level of aggregate demand.
12.If input price prices adjusted very rapidly to output prices, as classical economists argue, the Phillips curve would be:
1.vertical or nearly vertical.
2.downward sloping.
3.upward sloping.
4.horizontal or nearly horizontal.
13.The view of the Phillips curve that prevailed in the 1960s implied that policies that:
1.lower unemployment rate will tend to lower the inflation rate.
2.raise inflation rate will tend to raise the unemployment rate.
3.lower unemployment rate will tend to raise the inflation rate.
4.lower inflation rate will tend to lower the unemployment rate.
14.Doubts about the nature and the existence of the Phillips curve arose in the 1970s when the economy experienced:
1.simultaneously high rates of inflation and unemployment.
2.a high rate of inflation, along with a low rate of unemployment.
3.a high rate of unemployment, along with a low rate of inflation.
4.simultaneously low rates of inflation and unemployment.
15.If inflationary expectations increase, the Phillips curve will:
1.shift to the left.
2.become upwarding sloping.
3.shift to the right.
4.become vertical.
16.The 'expectations augmented Phillips curve' was the work of which group of economists?
1.Monetarists.
2.Marxists.
3.Keynesians.
4.New classical economists.
17.When economists use the term 'real business cycle theory', they are suggesting that business cycles are caused by:
1.business confidence.
2.changes in export demand due to the state of the world economy.
3.shifts in aggregate supply.
4.business expectations.
18.An unspoken agreement between workers and firms that the firm will not cut wages is known as:
1.an explicit contract.
2.a relative-wage contract.
3.an implicit or social contract.
4.employment-at-will.
19.The relative-wage explanation for the existence of downwardly sticky wages emphasises:
1.the contention that workers in one industry may be unwilling to accept a wage cut unless they know that workers in other industries are receiving similar cuts.
2.employment contracts that stipulate workers' wages, usually for a period of one to three years.
3.unspoken agreements between workers and firms that firms will not cut wages.
4.the incentive that firms may have to hold wages above the market clearing rate.
20.Even though explicit contracts may lead to layoffs during recessions, explicit contracts may still be efficient because such contracts:
1.minimise negotiation costs.
2.guarantee that only the least productive workers will be laid off.
3.will equitably spread the layoffs among junior and senior workers.
4.minimise unemployment effects.
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