Explain the long-run relationship between real hourly earning and productivity
What will be an ideal response?
Output per work hour or labor productivity has a close relationship with real hourly earnings over the long run. The reason is that real hourly earning is simply a measure of real income. Income and output are two ways of viewing the same relationship. Real income can only increase at the same rate as real output per worker. When workers are more productive they create more revenue for the firm that can be distributed to them in the form of real income. So as real output increases, so does real income which creates the positive association between the two measures.
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Assuming a 5-percent decrease in both the nominal (money) wage and 5-percent increase in the price level in the classical model, then
a. both the quantity supplied and demanded of labor will increase. b. the quantity supplied of labor will increase and the quantity demanded of labor will decrease. c. both the quantity supplied and demanded of labor will decrease. d. the quantity of labor supplied and demanded would remain constant.
Which of the following is false?
a. If people can anticipate the plans of policy makers and alter their behavior quickly, their behavior could neutralize the intended impact of government action on real GDP. b. The theory of rational expectations leads to optimistic conclusions regarding macroeconomic policy's ability to achieve its intended economic goals. c. Rational expectation economists believe that wages and prices are flexible, and that workers and consumers incorporate the likely consequences of government policy changes quickly into their expectations. d. Catching consumers and businessmen off-guard with macroeconomic policy changes gets harder the more you try to do it.
If the CPI rose from 200 in 1992 to 260 in 1996, by what percentage did prices increase?
What will be an ideal response?
Answer the following questions true (T) or false (F)
1. A decrease in liabilities will reduce a firm's accounting profit. 2. Economic profit is the difference between a firm's revenue and its opportunity costs. 3. An increase in liabilities will reduce a firm's net worth.