Explain several implications and characteristics of efficiency wage theories
What will be an ideal response?
The efficiency wage theory suggests that firms will pay workers a wage in excess of the workers' reservation wage to minimize quits and to increase productivity. The efficiency wage theory also suggests that nominal wages will be a function of labor market conditions. As the unemployment rate falls, the nominal wage will rise.
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Geraldo wants to purchase Marlena's 1914 prairie-style house so he can tear it down to build a 10,000 square foot home with space to operate his hypnotherapy practice
Marlena's great-grandfather built the 1914 house and she has no intention of selling it, especially to someone who wants to tear it down. The mayor, who is a friend and client of Geraldo, talks to Marlena and tells her that since Geraldo's proposed house would generate 20 times as much property tax for the city as Marlena's current house does, Marlena will need to either tear down the house herself and build a house comparable to the one Geraldo wants to build, or eminent domain will be used to force the sale of her house. In this case, the threat of eminent domain A) is in the best interest of society in general. B) would move a resource from someone who values it less to someone who values it more. C) gives people incentives to make second-best choices. D) would increase the size of the economic pie since property-tax revenues would increase.
An increase in the price level causes
A) the money demand curve to shift to the left. B) a movement up along the money demand curve. C) a movement down along the money demand curve. D) the money demand curve to shift to the right.
Goods that cost 1/5 of one dollar in the U.S. cost one kroner in Denmark, the real exchange rate would be computed as how many Danish goods per U.S. goods?
a. five b. the amount of kroner that can be bought with twenty U.S. cents c. the amount of kroner that can be bought with 5 dollars d. None of the above is correct.
Real income can be determined by:
A. dividing the price level by nominal income. B. deflating nominal income for inflation. C. inflating nominal income for inflation. D. dividing the annual rate of inflation by the number "70."