Flashcards
Macro Chapter 6 Cue Cards
Cards in this deck (22)
- 1Labour force consists of:___________&________________Employed and Unemployed
- 2More people flow out of Employment out of the labour force than into unemployment T/FTrue
- 3Wage Determination FormulaW= Pe F(u,z)
- 4How do fluctuations in aggregate unemployment affect individual workers?Effect of movements in unemployment rate on welfare of individuals AND
Effect of aggregate unemployment rate on wages - 5How can firms decrease employment in response to lower demandHire fewer new workers, lay off workers, or rely on quite and retirements.
- 6Relation between movements in proportion of unemployed workers finding jobs and unemployment rateHigher unemployment associated with lower proportions of unemployed workers finding jobs.
ie. Unemployment close to 10%, only 18% found a job as opposed to 28% finding jobs at lower unemployment. - 7When unemployment is high, workers are worse off in two ways:1. Higher probability of job loss
2. Lower probability of dinging a job and remain unemployed longer - 8What is collective Bargaining?Bargaining between union and a firm
- 9What is Reservation wageWage that would make them indifferent between working or being unemployed (prefer to be employed than not)
- 10Define Bargaining PowerHow costly it is to replace them and how hard it would be for them to find another job.
- 11Define an Efficiency WagePaying more than reservation to increase productivity and do the job right. Decreases turnover and increases productivity.
- 12Is low unemployment always good?Low unemployment means it is easy to find another job and higher wages
- 13Why does price level affect nominal wages?Both workers and firms care about REAL wages, not nominal. They care about W/P (wages/price of goods they can buy)
- 14Higher unemployment weakens worker's bargaining power T/FTrue:
Forces them to accept lower wages because it keeps workers willing to work. - 15Y=NOutput = Employment because cost of producing one more unit of output is the cost of employing one more worker.
- 16How do firms set their price based off of markup and workers?P = (1+m)W
- 17Price Setting Relation is drawn horizontal T/FTrue.
The real wage implied by price setting is 1/(1+m) it does not depend on unemployment rate.
Increase in markup leads firms to increase prices given wages they have to pay etc. - 18An increase in unemployment benefit leads to an increase in natural rate of unemployment T/FTrue
- 19What is the Natural level of Employment?Level of employment that prevails when unemployment is equal to its natural rate.
- 20Define Natural Level of OutputLevel of production when employment is equal to the natural level of employment. (Y=N)
- 21Equilibrium in the labour market requires that real wage chosen in wage setting be equal to real wage implied by price setting. (This determines equilibrium unemployment rate) T/FTrue
- 22In the short run, there is no reason for unemployment to be equal to the natural rate OR for output to be equal to its natural level. T/FTrue
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- University Macro ((d)Ch 6: Labour Market (exam)) Flashcards on Macro Chapter 6 Cue Cards, created by dylan_earl on 01/04/2015.
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