Feedback 5 – Labour Market, Exchange Rate Market & Financial Market 1) Mary Sue is the newly appointed CEO of a company that manufactures CD drives on an assembly line. Her staff has told her that the output the firm produces, given the number of workers employed, indicates that some workers may be shirking writing service descriptions . According to efficiency wage theory, what should she do? a) Pay all workers more than the equilibrium wage rate ) Pay all workers below the equilibrium wage rate to make up for the loss from shirking c) Make sure that workers are getting paid exactly the equilibrium wage rate d) None of the above is correct according to efficiency wage theory. 2) Which of the following have a tendency to raise the unemployment rate? a) The establishment of effective trade unions in an economy b) Firms deciding to pay efficiency wages in an economy c) Implementing a minimum wage in an economy d) All of these are correct. ) Which of the following causes the official measure of the unemployment rate to understate the true extent of joblessness? a) People who collect unemployment benefits report themselves to be searching for a job. b) Discouraged workers are not counted as unemployed. c) Many full time workers really want to be part time workers. 4) Trade unions cause unemployment because the union contract wage is set a) above the market wage, causing a shortage of labour. b) below the market wage, causing a surplus of labour. ) below the market wage, causing a shortage of labour. d) above the market wage, causing a surplus of labour. [pic] 5) Which of the following explanations are consistent with the Figure above? a) Speculators think that the value of the dollar relative to the euro will rise. b) A recession in the European Union c) An increase in Australian interest rates relative to interest rates in other countries d) An increase in incomes in the European Union 6) When the dollar weakens, each dollar buys a) more foreign currency, and so buys more foreign goods. ) more foreign currency, and so buys fewer foreign goods. c) less foreign currency, and so buys more foreign goods. d) less foreign currency, and so buys fewer foreign goods. 7) ________ are financial securities that represent partial ownership of a firm. a) Certificates of deposit b) Bonds c) Treasury bills d) Shares 8) Let I = investment; Y = total income; C = consumption; G = government purchases. In a closed economy a) I = Y + C — G. b) I = Y – C + G. c) I = Y – C — G. d) I = Y + C + G. 9) Equilibrium in the loanable funds market determines ) the current interest rate b) the real interest rate c) the expected interest rate d) the nominal interest rate Problem 1 By paying above equilibrium wage rates companies may make higher profits. Problem 2 Tokyo – most expensive Cancun – cheapest Problem 3 The dollar appreciates. Consume more Japanese goods and less Australian goods. Problem 4 Demand for AUD decreases; depreciate Problem 5 Supply of loanble funds shifts right Savings increase, real interest rates decrease, investment increases, growth rate expands
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