1. Briefly discuss the classical view of the labor market. Specifically, explain what type of unemployment occur based on the classical economists view? Explain.

2. Assume that wages are sticky in a downward direction. Show with the use of a graph what will happen when there is a decrease in labor demand. Label the graph properly.

3. What are the causes of inflexible or sticky wages?

4. Explain how the minimum wage laws may cause unemployment. What age group is most adversely affected by the minimum wage law?

5. What is the short-run relationship between the unemployment rate and inflation rate as explained by the economist Phillips?

6. Define the following:

a. Policy lags

b. Recognition lag

c. Implementation lag

d. Response lag

7. Explain why implementation lag for fiscal policy is longer than monetary policy.