The argument that the nominal wage is fixed because of​ long-term labour contracts is made by         A. proponents of Keynesian sticky wage​ models, and is generally not questioned by critics of those models.   B. proponents of menu cost​ models, but critics argue that these models do not take explicit account of the reasons that firms and workers write such contracts.

We have discussed two models that describe the relationship between inflation and economicgrowth. Which of the following is a property of the New Keynesian Model but NOT the RealBusiness Cycle (RBC) Model?a.Monetary policy has no effect on long run economic growth b.Recessions can be caused by a fall in aggregate demand. c.Prices are fully flexible in both the short and long run. d.All the above are properties of the RBC model. e.None of the above are properties of the New Keynesian model.

One of the reasons why it can take a long time for an economy to adjust to a long run equilibrium when there is unemployment is that Select one: a.wages are sticky downwards. b.the government doesn't usually time policy intervention very well. c.the Reserve Bank typically keeps interest rates too high. d.the exchange rate is slow to adjust.

According to neoclassical theory of the labour market the intersection of supply and demand for labour determine the nominal wage in equilibrium. True or False

Suppose the economy is self-regulating and the (actual) unemployment rate is less than the natural unemployment rate. This means that the economy is producing a level of output  a. above its naturel level and will eventually cut back on output  b. below its natural level and will eventually increase output  c. below its natural level but no forces exist to automatically increase output  d. above its natural level and institutional constraints will automatically be reduced so as  to allow the economy to continue producing this level  e. none of the above

Consider the neo-classical approach to macroeconomics.  Given there is a recessionary period, that theory suggests that, given some time ... Group of answer choices a. The AD line will shift right b. The AS line will shift left c. The AD line will shift left d. The AS line will shift right

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Consider the Keynesian Efficiency Wage Model. a. Draw the effort curve as it was discussed in class and explain the shape. b. Explain and show graphically how firms set real wages in the Keynesian Efficiency Wage model? c. What are the implications for the full-employment level of employment Ñ and the level of unemployment u? d. Explain why firms hesitate to lower wages even if the level of unemployment is high, e.g., during recessions.

IS-MP & Phillips Curvel a. Draw an economy in long-run equilibrium when the real interest rate is 3.5% using the IS-MP model as a function of the output gap. On the graph below, show the Phillips Curve as a function of the unemployment rate if the natural rate off unemployment is 4.6%. Label the initial equilibrium point A. b. Now show the effect of an increase in investment in the IS-MP and the Phillips Curve. Label this new equilibrium point B. IS-MP Phillips Curve (as a function of Unemployment)

Consider a one-sided search model of unemployment we developed in class. In class discussion we never mentioned how unemployment insurance benefit, b, is financed. For this question, you are going to incorporate it to the model. Let's assume that in order to finance the unemployment insurance benefit, b, the government imposes lump-sum tax, T, on each employed worker. Assuming that the economy is in a long-run steady-state equilibrium, the total amount that needs to be paid out to unemployed workers is bU, where as usual, U repre- sents the fraction of unemployed. The total amount of tax collected (which we can interpret as an unemployment insurance premium) from employed workers is (1U)T. The government runs balanced budget, hence, bU = (1 – U)T. In this new setting, please show the effect of an increase in unemployment in- surance benefits, b, on reservation wage, w*, and on the long-run unemployment rate, U. Using graphs clearly demonstrate how the behavior of this model is…