An industry utilizes capital and two types of labor. Unskilled labor is a substitute for capital while the skilled labor is complementary to capital. An increase in the price of capital will
A) cause the demand for labor to increase, raising wages of both skilled and unskilled labor.
B) cause the wage of unskilled labor to rise relative to the price of skilled labor.
C) induce the firms in the industry to cut back on all levels—capital, unskilled and skilled labor.
D) cause the demand for skilled labor to rise and the demand for unskilled labor to fall.
Answer: B
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Suppose that firms find that their inventories are less than planned. In this case, what is the initial relationship between aggregate planned expenditure and real GDP? Using the aggregate expenditure model, what adjustments, if any, take place?
What will be an ideal response?
A production possibilities curve indicates the
A. Combinations of goods and services an economy is actually producing. B. Maximum combinations of goods and services an economy can produce given its available resources and technology. C. Average combinations of goods and services an economy can produce given its available resources and technology. D. Maximum combinations of goods and services an economy can produce given unlimited resources.
Prices of final goods and services in Eduland have increased by 23% between Year 1 and Year 2. If the GDP deflator of Eduland in Year 1 was 100, the GDP deflator of Eduland in Year 2 is ________
A) 50 B) 112 C) 103 D) 123
When the Chairman of the Board of Governors explains in a television interview that the Fed hopes banks show more restraint in providing consumer credit because inflation is a problem, he is attempting to use
a. indirect theory instead of direct policy b. reason over passion in money matters c. selective media information d. moral suasion e. the paradox of thrift