5) The primary factor that caused many economists to lose their faith in the classical view of macroeconomics was A) the evidence that classical ideas were useful during economic booms, but not during economic recessions. B) the high levels of unemployment during the 1930s that were eliminated through fast money printing C) the high and persistent levels of unemployment that occurred during the Great Depression. D) the presence of both high unemployment and high inflation following the international oil shocks of the 70s 6) An adverse supply shock would A) shift the production function up and increase marginal products at every level of employment. B) shift the production function down and increase marginal products at every level of employment. C) shift the production function up and decrease marginal products at every level of employment. D) shift the production function down and decrease marginal products at every level of employment. 7) The theory that firms will be slow to change their products' prices in response to changes in demand because there are costs to changing prices is called A) cost-benefit theory. B) transactions cost theory. C) gift exchange theory. D) menu cost theory. 8) An adverse supply shock, such as a reduced supply of raw materials, would A) not affect the marginal product of labor. B) decrease the marginal product of labor. C) decrease the marginal product of capital, but have no effect on the marginal product of labor. D) increase the marginal product of labor. 9) One reason that firms hire labor to the point where w = MPN is A) if w MPN, the cost (w) of hiring additional workers is less than the benefits (MPN) of hiring them, so they should hire more workers. C) if w MPN, the cost (w) of hiring additional workers exceeds the benefits (MPN) of hiring them, so they should hire fewer workers. 10) A person is less likely to increase labor supply in response to an increase in the real wage when the income effect is and the substitution effect is A) larger; larger B) smaller; smaller C) smaller; larger D) larger; smaller 11) A sharp increase in stock prices makes people much wealthier. If the main effect of this increased wealth is felt on labor supply, what happens to current employment and the real wage rate? A) Both employment and the real wage rate would increase. B) Both employment and the real wage rate would decrease. C) Employment would increase and the real wage would decrease. D) Employment would decrease and the real wage would increase. 12) An adverse oil-price shock reduces labor demand. What happens to current employment and the real wage rate? A) Both employment and the real wage rate would increase. B) Both employment and the real wage rate would decrease ( )Employment would increase & the real wage would decrease . D) Employment would decrease & the real wage would increase