Chapter 4 Quiz - Macroeconomics

Questions and Answers

What does the law of supply in labor markets indicate?

A higher price for labor leads to a higher quantity of labor supplied.

What will improvements in the productivity of labor tend to do?

Increase wages.

Which of the following will NOT result in a leftward shift of the market demand curve for labor?

A decrease in consumer demand for goods.

A decrease in the demand for the final product.

An increase in technology improving labor efficiency.

An increase in the wage rate. (correct)

Which of the following will NOT result in a rightward shift of the market supply curve for labor?

An increase in labor productivity. Signup and view all the answers

What are rare in labor markets due to political unpopularity?

Price ceilings. Signup and view all the answers

A larger supply of workers tends to _____ real wages.

decrease Signup and view all the answers

What do many states have that imposes an upper limit on interest rates?

Usury laws. Signup and view all the answers

When consumers and businesses have greater confidence in repayment, what happens to the quantity demanded of financial capital?

It shifts to the right at any given interest rate. Signup and view all the answers

What is expected to happen to real wages if labor demand rises faster than labor supply?

Real wages will increase. Signup and view all the answers

What will shift the labor demand curve to the right?

An increase in productivity or an increase in the demand for the final product. Signup and view all the answers

What happens to the equilibrium price and quantity of margarine if the price of butter rises?

Both will rise. Signup and view all the answers

What causes the supply curve of textbooks to shift to the left?

A sharp increase in the demand for and construction of wood-frame homes. Signup and view all the answers

What is the likely economic effect on the market for steel when wage costs increase by 18 percent?

The supply curve of steel shifts to the left, increasing steel prices. Signup and view all the answers

Are markets always in equilibrium?

False Signup and view all the answers

What does the value of marginal product measure?

How much a one-unit increase in an input adds to the firm's revenue. Signup and view all the answers

What is the definition of interest rate?

The price of money. Signup and view all the answers

What are financial institutions?

Intermediaries between savers and borrowers. Signup and view all the answers

What is intertemporal decision making?

The process of considering whether to consume now or save for future consumption. Signup and view all the answers

What is the price of leisure?

Wage rate. Signup and view all the answers

What is the income effect?

When wages are high enough that a worker decides to work less and consume more leisure. Signup and view all the answers

Study Notes

Labor Market Dynamics

The law of supply indicates that higher wages lead to an increased supply of labor.
Improved productivity in labor typically results in increased wages.
An increase in wage rates does not cause a leftward shift in the market demand for labor.

Market Supply and Demand

Factors resulting in rightward shifts in labor supply do not include rises in labor productivity.
Price ceilings are uncommon in labor markets due to political unpopularity of rules restricting income.

Real Wages and Labor Supply

An increased supply of workers generally leads to a decrease in real wages.
Usury laws set upper limits on interest rates lenders can charge.

Financial Capital Demand

Greater consumer and business confidence in paying back loans shifts the demand for financial capital rightward at any interest rate.

Wage Trends

If labor demand rises more swiftly than labor supply, real wages are expected to increase.
Increases in productivity or final product demand push the labor demand curve to the right.

Substitutes and Market Equilibrium

A rise in butter prices results in increased equilibrium price and quantity for margarine, as they are viewed as substitutes.
A surge in demand for wooden homes shifts the supply curve of textbooks leftward due to increased paper demand.

Production Costs and Supply

A significant rise (18%) in steel mill wage costs raises production costs, shifting the steel supply curve leftward and increasing steel prices.
Markets do not always maintain equilibrium; however, they generally trend towards it without external interference.

Economic Concepts

The value of marginal product quantifies the revenue gained from an additional unit of input.
Interest rates represent the cost of borrowing money.
Financial institutions serve as intermediaries connecting savers with borrowers.
Intertemporal decision making involves weighing consumption now against future consumption through saving.
The price of leisure is effectively represented by the wage rate.
The income effect describes the phenomenon where higher wages allow workers to reduce hours and increase leisure time.

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Description

Test your knowledge on key concepts from Chapter 4 of Macroeconomics. This quiz includes flashcards covering the law of supply, productivity of labor, and market demand curves. Challenge yourself to see how well you understand these important economic principles!