What does it mean to say the labor supply is backwards bending? How does this relate to the direction and magnitude of the income and substitution effects? Will the labor supply be backwards bending if leisure is a normal good?
Will it be backwards bending if leisure is an inferior good?
Backwards bending means that as the wage rate increases, the amount of labor supplied may increase, but then decrease as the wage rises high enough. When leisure is a normal good, the income effect and substitution effect of a wage increase move in opposite directions. When the income effect dominates the substitution effect, the labor supply is backwards bending. If leisure is an inferior good, the two effects move together and the labor supply does not bend backwards.
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The quantity theory of money assumes a constant ratio of ________
A) money demand to money supply B) money supply to nominal GDP C) money supply to real GDP D) real GDP to nominal GDP
Most economists would consider it sensible for the federal government to ________ its current operating and capital expenditure budgets and then ________
A) consolidate, never borrow to fund it B) consolidate, borrow what is necessary to fund it C) separate, borrow what is necessary to fund the current operating budget. D) separate, borrow what is necessary to fund the capital expenditure budget.
Suppose there are 200 million persons in the population, 120 million persons in the civilian labor force, and 90 million persons are employed. The number of persons unemployed is _______ million and the unemployment rate is ___________ percent
A) 30; 25 B) 30; 33 C) 30; 5 D) 80; 40
From the late 1990s into the early 2000s, Hong Kong suffered from deflation. Most economists believed that the period of deflation ended and that inflation would begin to pick up slowly. Prices, however, were believed to be held in check because the Hong Kong dollar is pegged to the U.S. dollar. What does the monetary authority in Hong Kong have to do to peg its dollar to the U.S. dollar?
A. It will sell Hong Kong dollars when the price of the Hong Kong dollar rises and buy them when the price of the Hong Kong dollar drops. B. It will raise tariffs when the value of the Hong Kong dollar falls and lower them when the value of the Hong Kong dollar rises. C. It does not allow free trade in U.S. dollars; the foreign exchange market is illegal. D. It will sell Hong Kong dollars when the price of the Hong Kong dollar drops and buy them when the price of the Hong Kong dollar rises.