Youland is hit by a recession. What will be the impact of a countercyclical policy on labor demand in Youland if nominal wages are downwardly rigid?
What will be an ideal response?
If Youland is hit by a recession, its labor demand curve will shift to the left. Since wages are downwardly rigid, there will be a sharp fall in employment due to the recession. However, a countercyclical policy can partially reverse this situation by shifting the labor demand curve back to the right. The countercyclical policy will be more effective in this case than in the case of flexible wages because the full force of the expansionary policy will impact employment.
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A) Country 1 B) Country 2 C) Country 3 D) Country 4
If the price elasticity is between 0 and 1, demand is
A) elastic. B) inelastic. C) unit elastic. D) perfectly elastic.
By charging the equilibrium price for shared rides as opposed to the government-regulated price charged by traditional taxi companies, Uber has
A) increased deadweight loss. B) decreased producer surplus. C) increased consumer surplus. D) decreased consumer surplus.
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A. Avoidable fixed costs B. Sunk fixed costs C. Variable costs D. Average variable costs