WAGE-SETTING RELATION

wage-setting relation

Q. 1
In the wage-setting relation, the nominal wage increases when:
. the price level rises.
. the minimum wage decreases.
. the unemployment rate rises.
. unemployment benefits decrease.
. all of the above.

Q. 2
Based on the wage-setting behaviour, we know that a reduction in the unemployment rate will cause:
. an increase in the real wage.
. a reduction in the real wage.
. an upward shift of the WS curve.
. a downward shift of the WS curve.
. no change in the real wage.

Q. 3
Assume the economy is initially operating at the natural level of output. Suppose that individuals decide to increase their saving. We know that this increased desire to save will be

"neutral" in:
. the medium run, but not the long run.
. both the short run and the medium run.
. neither the medium run nor the short run.
. the short run, but not the medium run.
. none of the above.

Q. 4
Suppose policy makers underestimate the natural rate of unemployment. In such situations, policy makers will likely implement policies that result in:
. a steadily decreasing inflation rate.
. a higher inflation rate than necessary.
. an unemployment rate that is "too high".
. more unemployment than necessary.
. overly restrictive monetary and fiscal policy.

Q. 5
A counter-argument to the Lucas critique is based on the fact that:
. most macroeconomic data is inaccurately measured.
. wages are often fixed in contracts before a policy change is implemented.
. people expect the government to do the sensible thing.
. workers expectations are influenced by current policy changes.
. All of the above.

Q. 6
Based on a dynamic AD relation when the central bank has a fixed money growth rule, output growth will equal zero when which of the following conditions is satisfied?
. 5% nominal money growth and 5% inflation
. 0% nominal money growth and 5% inflation
. 5% nominal money growth and 0% inflation
. -5% nominal money growth and 4% inflation
. None of the above.

Q. 7
Which of the following will increase the steady-state growth rate of output per worker?
. an increase in the saving rate
. a reduction in the saving rate
. a decrease in the population growth rate
. a reduction in the rate of depreciation
. None of the above.

Q. 8
Suppose there is a fiscal expansion in the current period. This fiscal expansion will tend to cause a smaller increase in current output when:
. an increase in the current interest rate causes expectations of expansionary monetary policy in the future.
. an increase in the current interest rate causes an increase in expected future interest rates.
. an increase in current output causes an increase in expected future output.
. Both A and B.
. All of the above.

Q. 9
Assume the Marshall-Lerner condition holds. Which of the following would occur as a result of a decrease in the real exchange rate?
. an increase in domestic output
. a reduction in the quantity of imports
. an improvement of the trade balance
. All of the above.
. None of the above.

Q. 10
A reduction in the budget deficit can be reflected in:
. a decrease in investment.
. an increase in net exports.
. an increase in saving.