1. An increase in an effective federal minimum wage would tend to cause _________.
(A) a decrease in wage rates and an increase in employment.
(B) an increase in wage rates and employment.
(C) a decrease in wage rates and employment.
(D) an increase in wage rates and a decrease in employment.

2. Given the accelerationist Phillips curve $\triangle\pi = -0.7 (U - 5) + \rho$, suppose that inflation has increased from 8 percent to 10 percent. If the unemployment rate is 4 percent, then the price shock is _________. (A) 2.7 percent (B) 0.6 percent (C) 1.3 percent (D) 1 percent E) none of the above

3. The IS curve is $Y = 20 - 1.5r$, and the aggregate demand curve is $Y = 15.5 - 0.3\pi$. When the inflation rate is 3 percent, output is _________. (A) 20 (B) 14.6 (C) 9.5 (D) 3.6 E) none of the above

4. Factors that shift the AD Curve include _________. (A) government purchases (B) autonomous investment (C) taxes (D) all of the above E) none of the above

5. Using the Table 1, the unemployment rate is (A) 11.2 percent. (B) 6.3 percent. (C) 4.2 percent. (D) 10 percent. E) 5.8 percent.

1. On the Figure 1, the wage level at point _______ might represent an efficiency wage. (A) 2 (B) 4 (C) 6 (D) 5

2. On the Figure 1, suppose the labor market is in equilibrium at point 2, then the demand curve shifts down to the position shown on the graph. If the real wage has not changed, then the horizontal distance between points _______ measures the unemployment that results. (A) 2 & 4 (B) 2 & 1 (C) 3 & 4 (D) 6 & 4

3. Referring to the Figure 1, assume that, at first, the labor market is in equilibrium at point 4. In which scenario does unemployment rise, with no change in the quantity of employment? (A) real wage rises to the level of points 1 and 2 (B) supply shifts to pass through point 5, with no change in the real wage (C) demand shifts to pass through point 3, with no change in the real wage (D) supply shifts to pass through point 3, with no change in the real wage

4. Referring to the Figure 1, assume that, at first, the labor market is in equilibrium at point 4. Then, demand shifts to pass through point 3, and the real wage adjusts to the new equilibrium. _______ is _______ at the new equilibrium, compared to the original equilibrium. (A) unemployment; larger (B) unemployment; smaller (C) the labor force; smaller (D) employment; larger

5. On the Figure 2, movement from point to point might occur if there is a negative demand shock, followed by updating of expected inflation. (A) F; G (B) H; I (C) H; F (D) F; H E) none of the above

6. On the Figure 2, suppose point G is on the short-run aggregate supply curve π = 2.5 + 2*(Y - 22) and aggregate demand curve Y = 29.25 - 0.5π. If output at point G is 25, and inflation expectations are adaptive, then the inflation rate next period will be (A) 11.5 (B) 14.5 (C) 8.5 (D) 2.5 E) none of the above

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