question

The unemployment rate may underestimate the true extent of unemployment if:

answer

-many part-time employees would like to work full-time, but are unable to get the additional work.

question

Which of the following is false? A. People looking for full-time work who grudgingly settle for a part-time job are counted as employed, even though they are only "partly" employed. B. Some people working in the underground economy could be counted in labor statistics as unemployed, while others may be counted as not in the labor force. C. Unemployment rates can be quite different across different segments of the population, as well as varying substantially over time. D. The duration of unemployment tends to be greater when the amount of unemployment is high, and smaller when the amount of unemployment is low. E. None of the above are false; all are true.

answer

E. None of the above are false; all are true.

question

A major macroeconomic goal of nearly every society is:

answer

-maintaining stability of prices. -maintaining high levels of employment. -achieving high rates of economic growth.

question

Which of the following individuals are considered officially unemployed? A. a discouraged worker B. an individual who quits his job to raise a child C. an individual who is not looking for a job because he works in the underground economy D. an inmate in a prison who is making license plates for the state E. none of the above

answer

E. none of the above

question

Discouraged workers are defined as those:

answer

-who have given up looking for a job and are not counted as unemployed.

question

Kathryn chooses to go to college full-time rather than to work. Kathryn:

answer

-is not part of the labor force.

question

The total labor force equals:

answer

-the number of employed plus the number of unemployed persons.

question

The unemployment rate is the number of people classified as unemployed as a percentage of:

answer

-the labor force.

question

Underemployment occurs when:

answer

-Underemployment occurs when a worker is over-qualified and possesses more skills than his job demands. The term underemployed can also refer to workers who are only able to find part time work, but would prefer to work full time.

question

The FIRST formal acknowledgement of the primary macroeconomic goals of price stability, high employment, and promoting economic growth in the United States came with passage of the:

answer

-the Employment Act of 1946.

question

Which of the following is true? A. At the natural rate of unemployment, the economy is considered to be at full employment. B. At full employment, the economy is producing at its potential output. C. If unemployment is greater than its natural rate, the economy is producing at less than its potential output. D. If we are at less than full employment, some cyclical unemployment exists. E. All of the above are true.

answer

E. all of the above are true

question

The natural rate of unemployment:

answer

-is the sum of both frictional and structural unemployment when they are at a MAXIMUM.

question

In recent years, economists have come to believe that full employment in the U.S. economy occurs at an unemployment rate between:

answer

-4.5 and 5.5 percent.

question

According to Okun's law, a 2 percent increase in cyclical unemployment reduces output by almost:

answer

-4 percent.

question

A federal program aimed at retraining the unemployed workers of the declining coal and steel industries is designed to reduce which type of unemployment?

answer

-structural

question

Frictional unemployment occurs when:

answer

-a worker decides to quit to seek a different job.

question

Which of the following people is structurally unemployed? A. Brendan left his job as a short-order cook in New Jersey to become a short-order cook in Madrid, New Mexico. He was unemployed for six weeks during the transition. B. Mildred quit her job after giving birth to a child. C. Clem, a skilled corset maker, lost his job when his factory shut down due to a permanent reduction in the demand for corsets. D. Danielle lost her job when the electronics assembly plant was shut down temporarily due to low product sales in a slumping economy. E. John reduces his work hours as a furnace repairman in order to pursue a college education.

answer

C. Clem, a skilled corset maker, lost his job when his factory shut down due to a permanent reduction in the demand for corsets.

question

Cyclical unemployment arises when:

answer

-business activity in the macroeconomy declines.

question

When unemployment rises above the natural rate it reflects the existence of ____ unemployment.

answer

-cyclical

question

If the economy is operating with full employment, which of the following is essentially eliminated? A. frictional unemployment B. structural unemployment C. cyclical unemployment D. all of the above

answer

-C. cyclical unemployment

question

Economists use the term "business cycle" to refer to:

answer

-fluctuations in economic activity, measured by GDP or unemployment.

question

An unanticipated period of deflation will:

answer

-redistribute income from borrowers to lenders.

question

In the typical CPI shopping basket, which of the categories below represents the largest percentage of consumer spending? A. housing B. food & beverages C. transportation D. medical care E. recreation

answer

-A. housing

question

Given a fixed nominal interest rate on a loan, unanticipated DEFLATION:

answer

-increases the burden of paying off the loan.

question

The GDP deflator represents a somewhat ____ measure of prices that the CPI and the GDP deflator tends to be ____ volatile than the CPI.

answer

-broader; less

question

Why are creditors harmed by unexpected inflation?

answer

-Creditors are paid back money with less spending power than when it was originally loaned out.

question

During an inflationary period, those most likely to suffer reduced wealth are those who are holding their wealth in:

answer

-currency

question

The costs imposed on a firm from changing listed prices are called:

answer

-the menu costs of inflation.

question

Which of the following groups would not tend to lose from unexpected inflation? A. Retirees on fixed pensions. B. Creditors. C. Those whose incomes are tied to long-term contracts D. Those whose wages have cost of living adjustment clauses in their contracts. E. All of the above would tend to lose from unexpected inflation

answer

-D. Those whose wages have cost of living adjustment clauses in their contracts.

question

Inflation exists whenever:

answer

-the overall price level is rising.

question

The type of unemployment that occurs because of a recession is called:

answer

-cyclical unemployment.

question

Which of the following describes the historical record of the business cycles in the United States? A. The economy experiences an expansion about once every 20 years. B. Severe depressions have occurred frequently throughout history. C. Recessions have occurred every 25 years and are followed by two years of expansion. D. Periods of contraction seem to have gotten shorter over time.

answer

-D. Periods of contraction seem to have gotten shorter over time.

question

The period of declining growth in real GDP, between the peak of the business cycle and the trough, is called the:

answer

-contractionary phase.

question

In the expansion phase of the business cycle:

answer

-output is rising. -unemployment is falling. -consumer and business confidence is high. -investment is rising.

question

Which of the following observations concerning phases of a business cycle is NOT correct? A. Maximum amount of unemployment occurs exactly at the trough. B. Expansion phase is measured from the trough to the peak. C. Trough is the point in time when output stops declining. D. The contraction phase is also called the recession.

answer

-A. Maximum amount of unemployment occurs exactly at the trough.

question

Which of the following is true? A. A depression is a recession that is mild and relatively brief. B. The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude. C. The timing of business fluctuations is regular and therefore easily predictable. D. During the contractionary phase of the business cycle, the rate of unemployment is generally quite low.

answer

-B. The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude.

question

Economists usually use the term "recession" to refer to:

answer

-a significant reduction in output and employment lasting more than a few months.

question

Which of the following is not a leading economic indicator? A. Prices of common stock B. Number of new building permits and orders for factory equipment C. Unemployment rate and duration of employment D. Length of the average workweek

answer

-C. Unemployment rate and duration of employment

question

Which of the following observations concerning leading economic indicators is true? A. They provide warnings of likely downturns. B. They provide accurate information on the depth of a downturn. C. They provide accurate information on the duration of a downturn. D. Both b. and c. are true.

answer

-A. They provide warnings of likely downturns.?

question

Unemployment rises in ____, and falls in ____.

answer

-contractions; expansions

question

The development of a nationwide computerized job bank listing of all job openings would be most likely to reduce:

answer

-frictional unemployment.

question

A forestry worker who is out of work because of the temporarily low demand for wood products associated with a recession is defined as:

answer

-cyclically unemployed.

question

If the number of employed persons in a country equals 24 million, the number of unemployed persons equals 8 million, and the number of persons over age 16 in the population equals 40 million, the unemployment rate equals:

answer

-25 percent. (unemployed/employed+unemployed)

question

Given a fixed nominal interest rate on a loan, unanticipated INFLATION:

answer

-decreases the burden of paying off the loan.

question

Fred has lost his factory job, replaced by welding robots, and soon plans to go to technical school to learn computer repair because he cannot find a similar job to the one he lost. The type of unemployment facing Fred is:.

answer

-structural

question

An individual who voluntarily leaves one job and spends a period of time seeking another is considered:

answer

-frictionally unemployed.

question

A country's currency unit changes in purchasing power:

answer

-when there is either inflation or deflation.

question

Which of the following individuals would be considered unemployed? A. a lawyer temporarily working as an assistant in a law firm B. a computer technician who has not worked for 10 months and gave up looking 4 months ago C. a full time student who feels that he is taking too many classes to work D. none of the above

answer

-D. none of the above

question

If there are discouraged workers:

answer

-the unemployment rate will tend to understate the true level of unemployment.

question

Which of the following groups are typically harmed by unexpected inflation? A. lenders B. borrowers C. pensioners on fixed incomes D. both a. and c. E. both b. and c.

answer

-D. both a. and c.

question

Which of the following groups of people would be included in the official unemployment rate? A. part-time workers B. workers temporarily laid off from jobs to which they expect to return C. discouraged workers D. all of the above

answer

-B. workers temporarily laid off from jobs to which they expect to return

question

The index of leading economic indicators:

answer

-provide accurate information on the depth of downturns in the economy. -provides warnings of likely downturns

question

The index of leading economic indicators usually turns downward:

answer

-prior to economic contractions.

question

A full-time college student who is enrolled in school full-time and not seeking employment is considered:

answer

-out of the labor force.

question

Offering employees an efficiency wage may:

answer

-reduce turnover. -attract the most productive workers. -lead to a reduction in training costs. -boost employee morale.

question

If the economy is operating at the natural rate of unemployment, which of the following is essentially eliminated? A. frictional unemployment B. structural unemployment C. cyclical unemployment D. all of the above

answer

-C. cyclical unemployment

question

Why do economists prefer using the term economic fluctuation rather than business cycle?

answer

(find, chapter 11)

question

The term full employment implies an unemployment rate of:

answer

-approximately 5%

question

Real gross domestic product is the total value of all:

answer

-final goods and services adjusted for inflation.

question

Inflation:

answer

-can cause a redistribution of income from creditors to borrowers. -may discourage investment and economic growth. -can decrease the value of a nation's currency relative to other nations.

question

The unemployment rate is calculated as:

answer

-the number of unemployed persons divided by the number of employed plus unemployed persons.

question

Which of the following refers to extremely high rates of inflation for sustained periods of time? A. deflation B. hyperinflation C. bust D. depression E. expansion

answer

-B. hyperinflation

question

The total labor force consists of:

answer

-the number of employed persons plus the number of unemployed persons.

question

Deflation exists whenever:

answer

-the overall price level falls.

question

The cost incurred when individuals reduce their money holdings because of inflation is termed as the:

answer

-shoe-leather cost.

question

The government's fiscal policy is its plan to regulate aggregate demand by manipulating:

answer

-taxation and spending.

question

To offset the effect of a steep fall in net exports on the economy, the government might:

answer

-increase government purchases.

question

How does a change in income taxes primarily affect aggregate demand?

answer

-An income tax change alters disposable income and consumption spending.

question

The main components of spending, which can cause changes in aggregate demand, are:

answer

-consumption, investment, government purchases, and net exports.

question

If unemployment is the most significant problem in the economy, which of the following actions would be an appropriate fiscal policy response? A. decrease taxes B. decrease transfer payments C. increase government purchases D. all of the above E. both A and C above

answer

-E. both A and C above

question

If the government sought to end a recession, which of the following would be an appropriate policy? A. Increase taxes. B. Decrease government purchases. C. Decrease transfer payments. D. Decrease taxes and increase transfer payments. E. Increase taxes and decrease transfer payments.

answer

-D. Decrease taxes and increase transfer payments.

question

Assume that the government is considering plans to increase aggregate demand in order to reduce unemployment. Which of the following would be effective? A. Increase government purchases of goods and services. B. Decrease taxes. C.

Increase transfer payments.

D. Any of the above.

answer

-D. Any of the above

question

Expansionary fiscal policy, other things being equal, will tend to:

answer

-decrease unemployment rates.

question

Which of the following combinations of changes would have a contractionary effect on aggregate demand? A. An increase in government purchases and an increase in transfer payments. B. An increase in taxes and an increase in transfer payments. C. A decrease in taxes and an increase in transfer payments. D. An increase in taxes and a decrease in government purchases.

answer

-D. An increase in taxes and a decrease in government purchases.

question

The largest single source of revenue for the federal government is the:

answer

-personal income tax.

question

All decisions of the Federal Reserve are subject to approval by:

answer

-only the Board of Governors of the Federal Reserve.

question

Which of the following is most frequently used when the Fed is attempting to adjust the money supply? A. Changing reserve requirements B. Open market operations C. Changing the discount rate D. Moral suasion E. all of the above

answer

-B. Open market operations

question

Which of the following is not a function of the Federal Reserve System? A. limiting the national debt B. setting the required reserve ratio for the deposit holdings of depository institutions C. buying and selling government bonds to control the size and growth rate of the money supply D. controlling inflation

answer

-A. limiting the national debt

question

If the Fed buys a U.S. government bond from a member of the public,

answer

-the banking system has more reserves and the money supply tends to grow.

question

Federal funds market rate is:

answer

-the rate charged on loans provided to meet reserve requirement.

question

The primary reason that money is demanded is for:

answer

-transaction purposes.

question

Ceteris paribus, when nominal GDP falls:

answer

-interest rates will tend to fall.

question

When the money supply decreases, other things being equal,

answer

-real interest rates rise and investment spending falls.

question

If the Fed sells bonds, the short-run impact of this policy will tend to include:

answer

-an increase in real interest rates.

question

An expansionary monetary policy is likely to increase real output more than just temporarily:

answer

-when the economy is operating at less than full capacity.

question

The prosperity of a nation today is typically measured by its:

answer

-output per capita.

question

A country will roughly double its GDP in twenty years if its annual growth rate is:

answer

-3.5 percent.

question

Sergei has developed a new fat substitute that has no calories and produces no side effects. In order for him to be encouraged to bring this innovation to the marketplace he is likely to want which of the following the most? A. time to be able to thoroughly test the fat substitute B. an ample supply of capital to start the manufacturing process C. a trademark D. a patent

answer

-D. a patent

question

GDP is:

answer

-the value of all final goods and services produced domestically within a given period of time.

question

Which of the following would not be counted as a final good for inclusion in GDP? A. a piece of glass bought by a consumer to fix a broken window B. a sheet of glass purchased by General Motors for the side window of a new car C. a sheet of glass produced this year and ending up in the inventory of a retail hardware store D. All of the above are counted. E. Neither b. nor c. are counted.

answer

-B. a sheet of glass purchased by General Motors for the side window of a new car

question

Which of the following products are not included in current U.S. GDP? A. a Washington apple B. a Ford Mustang produced last year and sold this year C. a physical examination at a California health clinic D. All of the above are included in current U.S. GDP.

answer

-B. a Ford Mustang produced last year and sold this year

question

The largest single expenditure component of GDP is:

answer

-consumption.

question

The most volatile GDP category under the expenditure approach is:

answer

-investment

question

If a nation's imports exceed its exports:

answer

-GDP will be less than the sum of consumption, investment, and government purchases.

question

Which of the following would be an example or result of expansionary fiscal policy in action? A. an increase in taxation B. a decrease in government purchases C. a budget deficit D. a decrease in transfer payments E. a budget surplus

answer

-C. a budget deficit

question

Contractionary fiscal policy consists of:

answer

-decreased government purchases, increased taxes, decreased transfer payments.

question

If government policy makers were worried about the inflationary dangers in the economy, which of the following would be a correct fiscal policy change? A. Decrease consumption taxes. B. Decrease government purchases of goods and services. C. Increase transfer payments. D. Increase the budget deficit. E. None of the above.

answer

-B. Decrease government purchases of goods and services.

question

You are a member of Congress when the economy is in a recession. If your goal is to achieve a fully employed labor force, which of the following fiscal policy scenarios should you follow? A. Eliminate a federal budget deficit or add to a federal budget surplus. B. Raise government purchases, reduce taxes, and/or increase transfer payments. C. Decrease government purchases, increase taxes, and/or cut transfer payments. D. Raise government purchases, raise taxes by more than the increase in government purchases, and decrease transfer payments.

answer

-Raise government purchases, reduce taxes, and/or increase transfer payments.

question

Someone earning $150,000 per year will pay the same amount of ____________ as someone earning $150,000,000 per year:

answer

-Social Security tax.

question

A decrease in net taxes (taxes minus transfer payments) would do which of the following in the short run? A. decrease any budget deficit or increase any budget surplus B. reduce the price level C. reduce unemployment D. reduce consumption purchases E. All of the above.

answer

-C. reduce unemployment

question

Typically, the budget deficit is financed by:

answer

-issuing debt.

question

The major objective of the Federal Reserve System is to:

answer

-help in generating stabilization policies for the economy.

question

Decisions regarding purchases and sales of securities by the Fed are made by:

answer

-Federal Open Market Committee.

question

If the Federal Open Market Committee (FOMC) decides to expand the money supply, then:

answer

-it will issue directions to purchase U.S. government securities, thus putting more reserves in the hands of banks.

question

When the Fed purchases government securities from a commercial bank, the bank:

answer

-receives reserves that can be used to make additional loans.

question

Which of the following would constitute contractionary monetary policy by the Fed? A. An increase in income tax rates, a cut in government spending, and an elimination of the investment tax credit B. Open market sales of government securities, an increase in the discount rate, and an increase in reserve requirements C. An increase in tariffs on imported goods and a decrease in foreign aid D. Open market purchases of government securities, a cut in the discount rate, and an increase in reserve requirements

answer

-B. Open market sales of government securities, an increase in the discount rate, and an increase in reserve requirements

question

Which of the following pairs of policies shift aggregate demand in the same direction? A. A tax increase and an increase in the money supply. B. A transfer payment decrease and an increase in the money supply. C. A reduction in government purchases and decline in the money supply. D. An increase in government purchases and a decline in the money supply. E. None of the above pairs of policies shift aggregate demand in the same direction.

answer

-C. A reduction in government purchases and decline in the money supply.

question

If the Fed sells bonds, the short-run impact of this policy will tend to include:

answer

-an increase in real interest rates.

question

Expansionary monetary policy will tend to have what effect?

answer

-Increase the money supply and lower interest rates

question

A contractionary policy can be: A. a decrease in the money supply B. an increase in the money supply C. an increase in the interest rate. D. a decrease in the interest rate. E. either a. or c.

answer

-E. either a. or c.

question

Real gross domestic product (RGDP)

answer

-the total value of all final goods and services produced in a given period, such as a year or a quarter, adjusted for inflation

question

Employment Act of 1946

answer

-a commitment by the federal government to hold itself accountable for short-run economic fluctuations.

question

Unemployment rate

answer

-the percentage of the population aged 16 and older who are willing and able to work but are unable to obtain a job

question

Labor force

answer

-the number of people aged 16 and older who are available for employment

question

Discouraged worker

answer

-an individual who has left the labor force because he or she could not find a job

question

Job loser

answer

-an individual who has been temporarily laid off or fired

question

Job leaver

answer

-a person who quits his or her job

question

Reentrant

answer

-an individual who worked before and is now reentering the labor force

question

New entrant

answer

-an individual who has not held a job before but is now seeking employment

question

Underemployment

answer

-a situation in which a workers skill level is higher than necessary for a job

question

Labor force participation rate

answer

-the percentage of the working age population in the labor force

question

Frictional unemployment

answer

-the unemployment that results from workers searching for suitable jobs and firms looking for suitable workers

question

Seasonal unemployment

answer

-unemployment that occurs because of seasonal factors such as weather or fluctuations in the demand for some goods or services during different times of the year

question

Structural unemployment

answer

-the unemployment that results from workers not having the skills to obtain long term employment

question

Cyclical unemployment

answer

-unemployment due to short term cyclical fluctuations in the economy

question

Natural rate of unemployment

answer

-the median, or "typical", unemployment rate, equal to the sum of frictional structural unemployment when they are at a maximum

question

Potential output

answer

-the amount of real output the economy would produce if its labor and other resources were fully employed, that is, at the natural rate of unemployment

question

Price level

answer

-the average level of prices in the economy

question

Inflation

answer

-a rise in the overall price level, which decreases the purchasing power of money

question

Deflation

answer

-a decrease in the overall price level, which increases the purchasing power of money

question

Relative price

answer

-the price of a specific good compared to the price of other goods

question

Price index

answer

-a measure of the trend in prices paid for a certain bundle of goods and services over a given period

question

Consumer price index (CPI)

answer

-a measure of the cost of a market basket that represents the consumption of a typical household

question

GDP deflator

answer

-a price index that helps measure the average price level of all final consumer goods and services produced

question

Hyperinflation

answer

-extremely high rates of inflation for sustained periods of time

question

Menu costs

answer

-the costs imposed on a firm from changing listed prices

question

Shoe-leather cost

answer

-the cost incurred when individuals reduce their money holdings because of inflation

question

Nominal interest rate

answer

-the reported interest rate that is not adjusted for inflation

question

Real interest rate

answer

-the nominal interest rate minus the inflation rate; also called the inflation adjusted interest rate

question

Business cycles

answer

-short term fluctuations in the economy relative to the long term trend in output

question

Expansion

answer

-when output (real gdp) is rising significantly--the period between the trough of a recession and the next peak

question

Peak

answer

-the point in time when expansion comes to an end, that is, when output is at the highest point in the cycle

question

Contraction

answer

-when the economy is slowing down--measured from the peak to the trough

question

Trough

answer

-the point in time when output stops declining, that is, when business activity is at its lowest point in the cycle

question

Recession

answer

-a period of significant decline in output and employment

question

Depression

answer

-severe recession or contraction

question

Boom

answer

-period of prolonged economic expansion

question

Leading economic indicators

answer

-factors that economists at the commerce department have found typically change before changes in economic activity to occur

question

Economic growth

answer

-an upward trend in the real per capita output of goods and services

question

Productivity

answer

-the amount of goods and services a woker can produce per hour

question

Labor productivity

answer

-output per unit of worker

question

Innovation

answer

-applications of new knowledge that create new products or improve existing products

question

Research and development (R)

answer

-activities undertaken to create new products and processes that will lead to technological progress

question

Gross domestic product (GDP)

answer

-the measure of economic performance based on the value of all final goods and services produced within a country during a given period

question

Double counting

answer

-adding the value of a good or service twice by mistakenly counting the intermediate goods and services in GDP

question

Expenditure approach

answer

-calculation of GDP by adding the expenditures by market participants on final goods and services over a given period

question

Consumption

answer

-purchases of final goods and services

question

Investment

answer

-the creation of capital goods to augment future production

question

Fiscal policy

answer

-use of government purchases, taxes, and transfer payments to alter equilibrium output and the price level

question

Budget deficit

answer

-occurs when government spending exceeds tax revenues for a give fiscal year

question

Budget surplus

answer

-occurs when tax revenues are greater than government expenditures for a given fiscal year

question

Progressive tax

answer

-a tax designed so that those with higher incomes pay a greater proportion of their income in taxes

question

Regressive tax

answer

-as a persons income rises, the amount his or her tax as a proportion of income falls

question

Excise tax

answer

-a sales tax on individual products such as alcohol, tobacco, and gasoline

question

Flat tax

answer

-a tax that charges all income earners the same percentage of their income

question

Ability to pay principle

answer

-belief that those with the greatest ability to pay taxes should pay more than those with less ability to pay

question

Vertical equity

answer

-different treatment based on level of income and the ability to pay principle

question

Benefits received principle

answer

-the belief that those receiving the benefits from taxes are those who should pay for them

question

Open market operations

answer

-purchase and sale of government securities by the Federal Reserve System

question

Discount rate

answer

-Interest rate that the Fed charges commercial banks for the loans it extends to them

question

Federal funds market

answer

-market in which banks provide short term loans to other banks that need cash to meet reserve requirements

question

Money market

answer

-market in which money demand and money supply determine the equilibrium interest rate

question

Expansionary monetary policy in a recessionary gap

answer

-the increase in the money supply will lower the interest rate. The lower interest rate reduces the cost of borrowing and the return to saving. -in short, when the Fed increases the money supply, interest rates fall, and the quantity demanded of goods and services increases at each and every price level. -aggregate demand curve shifts from AD1 to AD2. -the result is greater RGDP growth at a higher price level at E2. (read example, pg. 354)

question

Contractionary monetary policy in an inflationary gap

answer

-in order to combat inflation, suppose the Fed engages in an open market sale of bonds. This would lead to a decrease in the money supply, causing the interest rate to rise. -the higher interest rate means that borrowing is more expensive, and the return to saving is higher. -consequently, firms find it more costly to invest in plants and equipment, and households find it more costly to finance new homes. -in short, when the Fed decreases the money supply, it raises the interest rate and decreases the quantity of goods and services demanded at every price level. -the aggregate demand curve shifts leftward from AD1 to AD2 -the result is a lower RGDP and a lower price level at E2. The economy is now at RGDPnr where RGDP equals the potential level of output

question

Efficiency wage model

answer

-a theory stating that higher wages lead to greater productivity

question

Minimum wage rate

answer

-an hourly wage floor set above the equilibrium wage

question

Wage and price controls

answer

-legislation used to combat inflation by limiting changes in wages and prices

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