Question : 31) Market-clearing theories of the labour market argue that A) : 1384492

31) Market-clearing theories of the labour market argue that

A) competitive labour markets can be relied upon to eliminate all unemployment.

B) labour markets will clear and involuntary unemployment will thereby be eliminated.

C) all unemployment is most easily corrected by government intervention in the economy.

D) all unemployment arises from firms being unwilling to demand labour services.

E) labour unions are necessary elements in reducing unemployment.

32) Market-clearing theories of the labour market feature ________ wages, and thus involuntary unemployment ________.

A) perfectly flexible; exists

B) sticky; does not exist

C) sticky; exists

D) perfectly flexible; does not exist

33) Which statement by an employer is consistent with the market-clearing theory of unemployment?

A) “I pay more than the going rate so I can hire good workers.”

B) “I pay only enough to attract workers who are at the bottom of the pay scale.”

C) “I love it when inflation goes up because that drives down my wage costs.”

D) “Workers can always find jobs, if only they lower their expectations.”

E) “Unions have only their current members’ interests at heart.”

34) Empirical observation of employment and real-wage fluctuations over the business cycle in Canada and other developed countries

A) is not able to refute the market-clearing theory of unemployment.

B) shows that employment is volatile and real wages are not.

C) shows that real wages are volatile and employment levels are not.

D) supports the market-clearing theory that there is no involuntary unemployment.

E) supports the market-clearing theory that labour markets always clear.

35) Refer to Figure 31-1. Given the labour supply and labour demand curves, and , which of the following statements is true in the market-clearing theory of unemployment?

A) At any wage above $10, there is an excess demand for labour, and the wage will be driven down.

B) At any wage above $10, there is an excess supply of labour, and the wage will be driven down.

C) At any wage above $10, there is persistent, involuntary unemployment.

D) At any wage below $10, there is an excess supply of labour, and the wage will be driven up.

E) At any wage below $10, there is an excess demand for labour, and the wage will be driven down.

36) Refer to Figure 31-1. The economy begins with D0 and S0. Suppose there is a negative shock to the economy, which shifts the demand for labour curve to D1. In the market-clearing theory of unemployment,

A) wages would be sticky and would adjust downward to, perhaps $9, causing involuntary unemployment of 200 workers.

B) the wage rate would fall to $8, employment would fall to 800, causing involuntary unemployment of 200 workers.

C) wages would be sticky and would adjust downward to, perhaps $9, causing involuntary unemployment of 300 workers.

D) the wage rate would fall to $8, employment would fall to 800 and there would be no unemployment.

E) all markets would clear, causing the demand for labour curve to shift back to D0 and the wage rate and employment levels would return to their original levels.

37) Refer to Figure 31-1. The economy begins with D0 and S0. Suppose there is a negative shock to the economy, which shifts the demand for labour curve to D1. An outcome consistent with non-market-clearing theories of unemployment is

A) the wage rate would fall to $8, employment would fall to 800, causing involuntary unemployment of 200 workers.

B) wages would be sticky and would adjust downward to, perhaps $9, causing involuntary unemployment of 300 workers at that wage.

C) the wage rate would fall to $8, employment would fall to 800 and there would be no unemployment.

D) wages would be sticky and would adjust downward to, perhaps $9, causing involuntary unemployment of 200 workers at that wage.

E) all markets would clear, causing the demand for labour curve to shift back to D0 and the wage rate and employment levels would return to their original levels.

38) Refer to Figure 31-1. The economy begins with D0 and S0. Suppose there is a positive shock to the economy, which shifts the demand for labour curve to D2, and the wage rate rises to $11. The result is

A) cyclical unemployment of 200 workers.

B) excess supply of labour of 300 workers.

C) excess demand for labour of 300 workers.

D) excess supply of labour of 200 workers.

E) excess demand for labour of 200 workers.

39) Refer to Figure 31-1. The economy begins with D0 and S0. Suppose there is a positive shock to the economy which shifts the demand for labour curve to D2. Which of the following explains why the wage might rise only to $11 but not enough to clear the market?

1) Firms may find it costly to make large changes in wages.

2) Wages are set only infrequently in contracts and are thus slow to respond to changes in demand.

3) The wage rate is slow to adjust when there are long-term employment relationships.

A) 1 and 2

B) 2 and 3

C) 1, 2, and 3

D) 2 only

E) 3 only

40) A central argument of non-market-clearing theories of unemployment is that

A) labour markets will clear and unemployment will thereby be eliminated.

B) all unemployment is caused by government intervention in the economy.

C) all unemployment arises from firms being unwilling to hire extra workers.

D) even competitive labour markets cannot be relied upon to eliminate involuntary unemployment.

E) monetary policy is rarely effective at reducing unemployment.