How would each of the following events affect the level of employment and the real wage rate? Explain which curves in the labor market diagram would be affected and show your work
(a) The stock market falls sharply.
(b) A war destroys a substantial amount of a country's physical capital.
(c) A new law reduces immigration of workers into the country.
(a) Lower wealth shifts the labor supply curve to the right; the new equilibrium has higher employment and a lower real wage.
(b) The loss of capital lowers the marginal product of labor, reducing labor demand; the shift of the labor demand curve to the left lowers the real wage and employment.
(c) Reduced labor supply causes a rise in the real wage rate in equilibrium and a decline in equilibrium employment.
You might also like to view...
Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
Economics is the study of
a. how to make money. b. choices in a world of scarcity. c. how to distribute unlimited production among limited wants. d. All of the above.
Suppose the following two events occur in the market for elementary school teachers:
a. Overcrowded schools and education budget cuts have discouraged young college students from pursuing careers in teaching. b. With an increasing birth rate, the number of children entering the elementary school system is expected to increase significantly over the next ten years. What is likely to happen to the equilibrium wage and quantity of teachers as a result of these two events? A) The equilibrium wage rises and the effect on the equilibrium quantity of elementary school teachers is indeterminate. B) The equilibrium quantity falls and the effect on the equilibrium wage of elementary school teachers is indeterminate. C) The equilibrium quantity falls and the equilibrium wage of elementary school teachers rises. D) The equilibrium quantity and the equilibrium wage of elementary school teachers fall.
The excess capacity theorem states that society would clearly benefit from a reduction in the number of monopolistic competitors.
Answer the following statement true (T) or false (F)