Suppose a union negotiates for its members a wage that is above the market-clearing wage. What problems does the union have to solve now? Explain
What will be an ideal response?
The higher wage implies there will be an excess of labor so the union must find a way to ration the jobs. The excess supply is due to two factors—the firms' quantity demanded for workers decreases and new workers are attracted into the industry due to the higher wage. Further, the higher labor costs are likely to encourage management to find ways to substitute other factors of production for labor.
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The nominal GDP in Liplandis is currently $3,456 billion. If net foreign factor income increases by $400 billion, the nominal GDP will ________.
A. not change B. increase by $400 billion C. fall, but by less than $400 billion D. fall by $400 billion
In the market for cell phones, all of the following would cause the supply of cell phones to change except:
A) an improvement in the technology used to produce cell phones. B) an increase in the cost of labor used to produce cell phones. C) a change in cell phone producers' expectations. D) an increase in the number of buyers in the market for cell phones.
Policies taken to move the economy closer to potential output:
A. must be expansionary policies. B. must be contractionary policies. C. are called stabilization policies. D. are lagging policies or automatic policies.
In Country A, the government simultaneously increases its expenditures by $200 billion and increases taxes by $200 billion. If the MPS is equal to 0.5, the government's action ________ real GDP by ________.
A. increases; $200 billion B. increases; $400 billion C. decreases; $400 billion D. has no effect on; $0