Intermediate Macro

ECO 302c Intermediate Macro Spring 2009 Quiz #4

1. If existing employees regard a newcomer who is paid less than them as a threat to their jobs, the existing employees will withhold cooperation and undermine the work of the new employee. This makes the employer reluctant to hire new employees at lower wages. This is the idea behind the _____ theory. a. menu cost b. implicit contract c. insider-outsider d. reverse causation e. misperceptions

2. If money demand increases suddenly, then the ______; which will cause the _____. a. LM curve to shift to the left AD curve to shift to the left b. LM curve to shift to the right AD curve to shift to the right c. IS curve to shift to the left AS curve to shift to the right d. IS curve to shift to the right AS curve to shift to the left e. none of the above.

3. Keynesians believe that the ____ market can remain in disequilibrium, so business cycle movements can be caused by shifts in _____. a. labor AD b. product AS c. asset AD d. labor AS e. product AD

4. The Phillips Curve relationship between inflation and unemployment appears to be stable when governments do not attempt to manage the economy – but unstable when governments do try to manage the economy. This outcome is best explained by: a. Real Business Cycle Theory b. Lucas Misperceptions Theory c. Keynesian Business Cycle Theory d. Reverse Causation Theory e. Implicit Contract Theory 5. Above is the degree of effort (or productivity) a typical employee might offer according to the wage paid. If the prospect of unemployment becomes less frightening to the employee (because unemployment compensation is made more generous), then the effort curve will shift to the ______and the wage the firm will want to pay will _____. a. left fall b. left rise c. right fall d. right rise e. none of the above.

6. In an open economy, the product market equilibrium occurs where the ____ and ____ lines intersect. a. labor supply labor demand b. desired national savings desired investment c. desired foreign lending desired net exports d. money supply money demand e. sf(k) (n+d)k