Question

1. Which of the following is a positive statement?

   	A.	The level of income inequality has become too large in the U.S.
   	B.	An increase in the minimum wage would result in increased teenage unemployment.
   	C.	Stricter immigration laws are needed in the U.S.
   	D.	The government should expand the earned income tax credit program because many workers choose not to work.
   	E.	An increase in the minimum wage would make the distribution of income more fair.

2 points   

QUESTION 2

1. If the number of workers in an industry rises, the equilibrium wage will:

   	A.	remain the same.
   	B.	increase.
   	C.	change in an unpredictable manner.
   	D.	decrease.

2 points   

QUESTION 3

1. If some workers get discouraged and leave the labor force, the labor force participation rate will:

   	A.	fall.
   	B.	rise.
   	C.	remain the same.
   	D.	change in an unpredictable manner.

2 points   

QUESTION 4

1. The official unemployment rate may overstate the cost of unemployment because ______________ are sometimes counted as being unemployed.

   	A.	workers who are working "off-the-books"
   	B.	discouraged workers
   	C.	all teenagers
   	D.	part-time workers who prefer to work part-time

2 points   

QUESTION 5

1. If leisure is a normal good, an increase in the level of non-labor income will:

   	A.	lower the reservation wage for most workers.
   	B.	shift the budget constraint inward toward the origin.
   	C.	cause the budget constraint to become steeper.
   	D.	reduce the quantity of labor supplied.
   	E.	cause indifference curves to become flatter.

2 points   

QUESTION 6

1. During a recession, the labor force participation rate generally:

   	A.	is as likely to rise as it is to fall.
   	B.	falls.
   	C.	remains unchanged.
   	D.	rises.

Answer 1

1. Answer: A. The level of income inequality has become too large in the U.S.
Explanation: A positive statement generally refers to a factual and objective statement that has the potential to be tested or rejected on the basis of facts or evidence available. It generally shows the situation as "what is".
On the other hand, the normative statement derives the value judgement and looks into the situation as "it ought to be"

2. Answer: D. Decrease.
Explanation: When the supply of labor increases, the wages decreases. On the other hand, if the demand for labor increases, the wages increase.

3. Answer: A. Fall.
Explanation: A labor force participation rate is the sum of employed and unemployed workers divided by working age population. More often, during the recessionary period, many workers get discouraged to work resulting in the fall in the participation rate since discouraged workers are not included.