Principles of Macroeconomics, Chapter 14 Exam Questions with Answers

Principles of Macroeconomics, Chapter 14 Exam Questions with Answers labor demand curve - Correct Answers: a graph that illustrates the amount of labor that firms want to employ at each given wage rate labor supply curve - Correct Answers: a graph that illustrates the amount of labor that households want to supply at each given wage rate sticky wages - Correct Answers: the downward rigidity of wages as an explanation for the existence of unemployment social contracts (implicit contracts) - Correct Answers: unspoken agreement between firms and workers that firms will not cut wages relative-wage explanation of unemployment - Correct Answers: if workers care about their wages relative to those of other workers, they may be unwilling to accept wage cuts unless all get the same wage cuts explicit contract - Correct Answers: employment contract that stipulates a worker's wages, usually for one to three years cost-of-living adjustments (COLAs) - Correct Answers: contract provisions that tie wages to changes in the cost of living efficiency wage theory - Correct Answers: an explanation for unemployment that says employees who are paid above the market wage rate have incentive to be more productive, giving employers an incentive to pay them above market wage minimum wage laws - Correct Answers: laws that set a floor for wage rates inflation rate - Correct Answers: percentage change in the price level Philips Curve - Correct Answers: a curve showing the relationship between the inflation rate and the unemployment rate natural rate of unemployment - Correct Answers: the unemployment that occurs as a normal part of the functioning of the economy NAIRU - Correct Answers: Non-Accelerating Inflation Rate of Unemployment