How does a contractionary monetary policy affect the labor demand curve in an economy?
What will be an ideal response?
If the government follows a contractionary monetary policy, money supply falls. A fall in money supply causes the price level to fall according to the Quantity Theory of Money. If the price level falls, firms cut down production. As a result, there is a decrease in the demand for labor and the labor demand curve shifts to the left.
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Explain why the long-run aggregate supply curve is vertical
What will be an ideal response?
Duke increased his spending on steak from $7 to $11 per week because of a 12 percent salary increase, so his
A) income elasticity of demand for steak is 1.37. B) price elasticity of demand for steak is 1.37. C) income elasticity of demand for steak is 3.7. D) price elasticity of demand for steak is 3.7.
A tax wedge is ________
A) the difference between the tax rate on income and capital gains B) equal to the difference between what people earn before and after taxes are accounted for C) the size of the decrease in labor force participation when labor income is taxed D) the difference between the rate on Treasury securities and the income tax rate
An increase in supply, other things being equal, will cause which of the following to occur?
A. quantity supplied to decrease. B. a leftward shift in the demand curves as the price increases. C. quantity demanded to increase. D. a rightward shift in the demand curve as the price falls.