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ECO 302c
Intermediate Macro
Spring 2014
Quiz #4
1.
According to the efficiency wage model, employers choose a wage rate in
order to maximize the productivity per dollar spent on wages. The model also
implies:
(i)
there may be involuntarily unemployed workers even when the labor market
is working as well as we can expect.
(ii)
unemployed workers can obtain jobs by offering to work at a wage slightly
lower than the wage currently paid to existing workers.
(iii)
an increase in labor supply might not change full-employment output.
a.
b.
c.
d.
e.
only (i) is true.
only (ii) is true.
only (iii) is true.
only (i) and (iii) are true.
(i), (ii), and (iii) are all true.
2.
In the days of the gold standard, every big discovery of gold led to an
expansion of the money supply. The business cycle expansions that followed the
gold discoveries can be explained by the _____ theory, but not by the _____ theory.
a.
b.
c.
d.
e.
Keynesian
classical (market-clearing)
reverse causation
classical (market-clearing)
reverse causation
reverse causation
misperceptions
Keynesian
Keynesian
misperceptions
3.
Every 4 years in November the US holds a presidential election. The data
show faster-than-usual increases in the money supply in the months before the
election. No unusual movement of output or employment occurs. This can be
explained by the _____ theory.
a.
b.
c.
d.
e.
Keynesian
reverse causation
efficiency wage
misperceptions with rational expectations
insider-outsider
4.
According to the misperceptions model (if firms and individuals have rational
expectations), then increases in the money supply CAUSE an increase in output and
employment if:
a.
b.
c.
d.
e.
the economy is operating below full-employment.
the increase in the money supply is temporary.
the increase in the money supply could not have been predicted.
the money demand curve also shifts to the right.
there is a positive shock to productivity.
5.
Every year, the money supply starts rising before the intense Christmas
shopping season occurs. If one considers the intense activity of Christmas shopping
to be similar to a business cycle expansion, the relationship between the growth of
the money supply and the increase in economic activity is best explained by the
_____ theory.
a.
b.
c.
d.
e.
Keynesian
misperceptions
efficiency wage
reverse causation
classical (market-clearing)
6.
If one doesn’t believe that the classical (market-clearing) model gives a close
approximation to what happens in real-life (because the world isn’t perfect), the
market which is the most “imperfect” and is most unlike the ideal approximation
used in the classical general equilibrium model is the:
a.
b.
c.
d.
e.
product market
capital market
asset market
labor market
money market