1.Efficiency wages exist when wages are...

a.Equal to the market wage.

b.High enough above market levels that workers increase their productivity.

c.Such that the NAIRU is zero.

d.Just high enough to induce a worker to take a job.

e.Such that cyclical unemployment is zero.

2. Consider an economy initially in a long-run equilibrium. A positive AS shock will _____ the price level and _____ output in the short run. In the long run, the price level will _____ and output _____.

a.Decrease; increase; decrease further; will be restored to potential output.

b.Increase; increase; return to its initial level; will be restored to potential output.

c.Decrease; decrease; decrease further; will decrease further.

d.Decrease; increase; return to its initial level; will be restored to potential output.

e.Increase; increase; decrease; will be restored to potential output.