Question 1

Refer to the first image. What economic concept does the curve $$Y = A F(K_{	ext{fixed}}, N)$$ illustrate when only $$N$$ increases and $$K is $$held constant?

Accepted Answer

Diminishing marginal product of labour

Question 2

In the second image, why is $$Y_3$$ - $$Y_2$$ \u003c $$Y_2$$ - $$Y_1$$ when moving from $$N_2 to$$ $$N_3$$ compared to $$N_1 to$$ $$N_2$$?

Accepted Answer

Because the marginal product of labour diminishes as $$N$$ increases with $$K$$ fixed

Question 3

The third image shows the marginal product of labour (MPN) curve. What does the downward slope of the MPN curve represent?

Accepted Answer

Diminishing marginal product of labour

Question 4

In the fourth image, what is the effect of an increase in total factor productivity (TFP) on the marginal product of labour (MPN) curve?

Accepted Answer

The MPN curve shifts upward

Question 5

Based on the fifth image, which of the following statements is correct regarding labour market flows?

Accepted Answer

There are significant flows between all three states: employed, unemployed, and not in the labour force

Question 6

Refer to the sixth, seventh, and eighth images. What general trend is observed in annual working hours per worker in developed countries since 1950?

Accepted Answer

Annual working hours per worker have decreased

Question 7

In the ninth image, what does the upward-sloping red line represent in the context of labour supply?

Accepted Answer

The willingness to supply labour as real wage increases

Question 8

In the tenth image, what is the effect of an increase in expected future wage on the current labour supply curve?

Accepted Answer

The labour supply curve shifts to the left

Question 9

In the eleventh image, what happens to the equilibrium wage and employment when the labour supply curve shifts upward due to an increase in expected future wage?

Accepted Answer

Equilibrium wage increases, but employment decreases

Question 10

In the twelfth image, what does the intersection point $$E$$ represent in the labour market?

Accepted Answer

The equilibrium where labour supply equals labour demand

Question 11

In the thirteenth image, if the real wage is set above the equilibrium wage, what will happen in the labour market?

Accepted Answer

There will be excess supply of labour (unemployment)

Question 12

In the fourteenth image, what is the effect of an increase in total factor productivity (TFP) on the marginal product of labour (MPN) and employment at a given wage?

Accepted Answer

MPN increases and employment increases

Question 13

Suppose the production function is $$Y = AK$$^{0.3}$$N^{0.7}$$ and $$A$$ increases by 10%. If $$K$$ and $$N$$ remain constant, by approximately what percentage does $$Y$ increase?

Accepted Answer

By 10%

Question 14

If the marginal product of labour (MPN) is given by $$MPN = 10 - 0.5N$$ and the real wage is $$w = 5$$, what is the equilibrium level of employment?

Accepted Answer

$$N = 5$$

Question 15

If the unemployment rate is 5%, the participation rate is 65%, and the working-age population is 20 million, how many people are unemployed?

Accepted Answer

1,000,000

Question 16

If the Cobb-Douglas production function is $$Y = AK$$^{0.3}$$N^{0.7}$$, what is the formula for labour productivity ($$Y/N$)?

Accepted Answer

$$Y/N = AK$$^{0.3}$$N^{-0.3}$

Question 17

Which of the following best describes frictional unemployment?

Accepted Answer

Unemployment due to workers searching for jobs and matching with employers

Question 18

If the growth rate of output ($$\frac{\Delta Y}{Y}) is 4$$%, the growth rate of capital ($$\frac{\Delta K}{K}) is 2$$%, the growth rate of labour ($$\frac{\Delta N}{N}) is 1$$%, and the capital share $$\omega = 0.3$$, what is the growth rate of total factor productivity ($$\frac{\Delta A}{A}$$)?

Accepted Answer

1.1%

Question 19

Which of the following is a likely effect of skill-biased technological change?

Accepted Answer

It increases wage inequality between skilled and unskilled workers

Production, Productivity, Growth Accounting, Unemployment, and Labour Markets: Study Notes for Macroeconomics

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