7 In the wagesetting relation the nominal wage tends to decr

7. In the wage-setting relation, the nominal wage tends to decrease when A) the price level increases. B) the unemployment rate decreases. C) unemployment benefits decrease. D) the minimum wage increases. E) all of the above 8. The price setting equation is represented by the following: P-(m)W. When there is perfect competition, we know that m l equal A)W B) P D) W/P E) none of the above 9. The natural rate of unemployment is the rate of unemployment A) that occurs when the money market is in equilibrium. B) that occurs when the markup of prices over costs is zero. C) where the markup of prices over costs is equal to its historical value. D) that occurs when both the goods and financial markets are in equilibrium. E) none of the above 10. The natural level of output is the level of output that occurs when A) the goods market and financial markets are in equilibrium. B) the economy is operating at the unemployment rate consistent with both the wage-setting and price-setting equations C) the markup (m) is zero. D) the unemployment rate is zero. E) there are no discouraged workers in the economy 11. Suppose we wish to examine the determinants of the equilibrium real wage and equilibrium level of employment (N). In a graph with the real wage on the vertical axis, and the level of employment on the horizontal axis, the wage-setting relation will now be A) a vertical line B) a horizontal line. C) an upward sloping line. D) a downward sloping line E) a curve that first slopes upward, then downward. 12. The natural level of employment (N) will increase when which of the following occurs? A) an increase in the markup of prices over costs B) a reduction in unemployment benefits C) an increase in the actual unemployment rate D) all of the above E) none of the above

Solution

Ans7) C is the correct option. unemployment benefits decrease

Ans8) C is the correct option. 1

Ans9) E is the correct option. None of the above

Ans10) B is the correct option. the economy is operating at the unemployment rate consisten with both the wage-setting and price-setting equations

Ans11) A is the correct option an upward sloping line.

Ans12) B is the correct option. a reduction in unemployment benefits