Suppose firms in an industry hire unskilled labor and skilled labor. Unskilled labor is a substitute for capital and skilled labor is a complement with capital. A decrease in the real price of capital would
A) cause the demand for labor to increase, raising wages of both skilled and unskilled labor.
B) cause the demand for unskilled labor to increase and the demand for skilled labor to decrease. The wage of unskilled labor would rise relative to the wage of skilled labor.
C) cause the demand for unskilled labor to decrease and the demand for skilled labor to increase. The wage of unskilled labor would decrease relative to the wage of skilled labor.
D) cause the demand for both kinds of labor to decrease. Wages rates of both kinds of labor would decrease too.
Answer: C
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A) capital gains on stocks, bonds, houses, and other assets. B) net investment in consumer durables. C) household accumulations in government pensions. D) All of the above.
In the aggregate expenditures model, if aggregate expenditures (AE) are less than GDP, then:
a. inventory is unchanged. b. inventory is depleted. c. employment increases. d. GDP decreases.
Given the graph shown, the quantity that would be associated with the price of $4 in a supply table would be:
A. 2. B. 8. C. 6. D. 4.
A group of buyers and sellers of a particular good or service is called a(n)
a. coalition.
b. economy.
c. market.
d. competition.