The figure above illustrates the current market for fast-food workers in Baltimore
a. Without any government intervention, what is the equilibrium wage rate and amount of employment?
b. If the city government imposes a minimum wage of $3 an hour, what is the amount of employment? Does the minimum wage create any unemployment? Why or why not?
c. If the city government imposes a minimum wage of $6 an hour, what is the amount of employment? Does the minimum wage create any unemployment? Why or why not?
a. The equilibrium wage rate is $4 an hour and the equilibrium amount of employment is 8,000 workers.
b. Employment remains 8,000 workers. The minimum wage does not create any unemployment. The $3 per hour minimum wage does not bring about any unemployment because it is below the equilibrium wage rate.
c. Employment decreases to 4,000 workers, the quantity of labor demanded at a wage rate of $6 per hour. At the wage rate of $6 per hour, the quantity of labor supplied is 12,000 workers and the quantity of labor demanded is 4,000 workers. Hence there are 8,000 workers unemployed. The minimum wage of $6 an hour creates unemployment because it is higher than the equilibrium wage rate. As a result, the quantity of labor supplied increases and the quantity of labor demanded decreases, leading to a situation of excess supply, or unemployment.
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Changes in the expected rate of inflation will:
A. cause the SRAS curve to become vertical. B. not shift but create a movement along the SRAS curve. C. shift the SRAS curve downward or upward. D. cause the SRAS curve to become upward-sloping.
When the marginal cost curve lies above the average cost curve, ________
A) the marginal cost curve slopes upward, while the average cost curve slopes downward B) the marginal cost curve slopes downward, while the average cost curve slopes upward C) both the marginal cost curve and the average cost curve slope upward D) both the marginal cost curve and the average cost curve slope downward
Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real GDP and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. Real GDP rises, and reserve-related (central bank) transactions become more positive (or less negative). b. Real GDP rises, and reserve-related (central bank) transactions remain the same. c. Real GDP and reserve-related (central bank) transactions remain the same. d. There is not enough information to determine what happens to these two macroeconomic variables. e. Real GDP falls, and reserve-related (central bank) transactions remain the same.
Suppose that a country is producing on its PPC at a point to the left of the tangency between the trade line and the PPC. At the production point,
A) the opportunity cost in production of the good on the horizontal axis is less than its trade price. B) the opportunity cost in production of the good on the horizontal axis is more than its trade price. C) the opportunity cost in production of the good on the vertical axis is less than its trade price. D) the opportunity cost in production of the good on the horizontal axis may be either less than or more than its trade price.