Question

Question 6 Every month 27% of the unemployed find a job and 3% of the employed are seperated from their jobs. If the current unemployment rate is 10%, do you expect the unemployment rate to

a. decrease

b. stay the same

c. cannot be determined

d. increase

Question 7 When the real wage is above the level that equates labor supply to labor demand, then the quantity of labor supplied

a. depends on the nominal wage

b. is smaller than the quantity of labor demanded

c. is equal to the quality of labor demanded

d. is greater than the quantity of labor demanded

Question 8 The minimum wage is raised and, at the same time, many government employment agencies are opened across the country. Which of the following are the most likely effects?

a. An increase in frictional unemployment and an increase in structural unemployment

b. An increase in frictional unemployment and a decrease in structural unemployment

c. A decrease in frictional unemployment and an increase in structural unemployment

d. A decrease in frictional unemployment and a decrease in structural unemployment

Question 9 Which of the following is mosy likely to occur as a result of an increase in the minimum wage?

a. some investment bankers lose their job because of the decrease in labor demand

b. university professors see their wages rise

c. cashiers at grocery stores are replaced by automatic cashier machines

d. lawyers see their wages fall

Question 10 According to efficiency wage theory, higher wages paid by firms Do Not lead to

a. structural unemployment

b. wages above their equilibrium level

c. lower firm profits

d. increased worker productivity

Answer 1

Answer 6. Option B is the correct option. It can be seen with the helpmof an example if we consider the population to be 100 then 90 persons are employed and out of those 90 people, 2.7 persons lose their jobs and atbthe same time out of the 10 unemployed people 2.7 people get jobs. This leaves us at the same position as before.

Answer 7. Option D is the correct option. If the real wage level rises above the equilibrium level then the quantity of labor supply will rise but the quantity of labor demanded will fall as compared to the equilibrium level. This is because rise in wages attracts laborers and thusbthey would want the job but the employers won’t hire laborers at such a high wage rate and thus the demand falls.

Answer 8. Option B is the correct option. After opening up of many government agencies many employees would want to work in such agencies and thus there would be rise in frictional unemployment as people will move from one job to another. While at the same time structural unemployment would reduce as the economic conditions for the job are favourable thus low structural unemployment.

Answer 9. Option C is the appropriate answer. Due to rise in the minimum wages the employers would want to resist such rise in the cost of labor and thus they would prefer automatic cash machines over the cashier which charges high wages than the amount it would take to maintain a automated cashier.