7. Suppose the government decides to reduce the marginal income tax rate across all income brackets, effectively making it more attractive for workers to provide their labor. a. Use the labor market diagram model to illustrate this shock; be sure to label your initial equilibrium and your new equilibrium. b. Assuming the population and the labor force are held constant, explain what the effect of the shock is on wages, the employment-to-population ratio and unemployment. c. If we did not hold the labor force constant, how might your answer to part b change? Suppose that wages are rigid and do not immediately adjust to the shock. How might this impact unemployment in the short-run? d.

7. Suppose the government decides to reduce the marginal income tax rate across all income brackets, effectively making it more attractive for workers to provide their labor. a. Use the labor market diagram model to illustrate this shock; be sure to label your initial equilibrium and your new equilibrium. b. Assuming the population and the labor force are held constant, explain what the effect of the shock is on wages, the employment-to-population ratio and unemployment. c. If we did not hold the labor force constant, how might your answer to part b change? Suppose that wages are rigid and do not immediately adjust to the shock. How might this impact unemployment in the short-run? d.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: Structural unemployment is sometimes said to result from a mismatch between the job skills that…

A: In an open economy, trade plays an important role as the speciality of workers determine traded…

Q: Briefly discuss why more migrants do not always lead to lower wages? Use the classical model of the…

A: International migration is a strong expression of people's desire to improve their circumstances in…

Q: 3. Discouraged workers and involuntary part-time workers Simply counting the number of unemployed…

Q: What are the two biggest recessions in terms of length and magnitude from the graph, the shaded…

A: You have asked multiple questions. We will answer the first question for you. If u want any specific…

Q: The figure depicts the labour market model. Which of the following statements a Labour supply Real…

A: In the labor market model, the labor supply curve shows the number of people willing and able to…

Q: Refer to the graph to answer this question. Which of the following will make Labor Demand for Grotto…

A: The movement from D1 to D2 would be the rightward movement which occurs due to an increase in demand…

Q: Suppose the world price of aluminum falls significantly. The demand for labor among…

A: A person is said to be frictionally unemployed when he/she is looking for his/her first job, or…

Q: 11. Consider a world in which all individuals complete high school, and then they have T years…

Q: 2. Explain the key principles and policy implications of the neoclassical model of the labour…

A: The neoclassical model of the labor market is an economic theory that explains how wages and…

Q: Scenario: Consider Country A with a population of 2 million people. In Country A, there are 1.5…

Q: Suppose that because of uncertainty in the economy, employers cut back on hirings with the result…

A: Equilibrium is where demand curve intersects supply curve. Fall in demand will shift the demand…

Q: The figure on the right shows the average monthly flows (in millions) between employment,…

A: Unemployment refers to the condition of a person who is included in the labor force but is not…

Q: 1. Consider labor market in an economy. In a classical model, you can think that each worker comes…

A: Keynesian economics is a macroeconomic theory developed by British economist John Maynard Keynes in…

Q: 1) Assume that the real wage in an economy is held above equilibrium. a. Graphically illustrate how…

A: Meaning of Demand: The term demand refers to the willingness of an individual to purchase a…

Q: Suppose that all social programs simultaneously become more generous. In particular suppose that…

A: Unemployment refers to the situation where individuals who are willing and able to work are unable…

Q: Consider the early 1970s when an oil price shock roiled the U.S. economy, including the labor…

A: Here we have to study about the Impact of oil shock on demand and supply of labor demand and supply.…

Q: 10. A job-search model of the natural rate of unemployment This question refers to the job search…

A: Here, given information is: Separation rate (s)= 0.03 Job finding rate (f)= 0.12 Labor force= 200…

Q: 3. We study the effects of changes in labor productivity on the labor market in the long run in the…

A: Disclaimer: “Since you have asked multiple questions, we will solve the first question for you. If…

Q: 2.If, in the formal work sector, the unemployment rate is 20%, and the wage is $10/hour, what is the…

A: Answer -

Q: 1. Consider the classic competitive labor market. W S L DL Which of the following statements is most…

A: The scenario outlines a traditional competitive labor market in which the intersection of the demand…

Q: In an economy, if structural unemployment decreases while theother types of unemployment remain…

A: The objective of the question is to understand the impact of a decrease in structural unemployment…

Q: Consider a diagram in which employment is measured in the horizontal axis, and real wage is measured…

A: Hello. Since you have posted multiple questions and not specified which question needs to be solved,…

Q: 3) a. In general, unemployment rates are higher for workers in lower-skilled occupations,…

A: a. African Americans, Hispanics, workers in lower-skilled occupations, and less-educated workers.

Q: hy does a measure of labor productivity—the output produced per worker– rise for many firms during…

A: Labor productivity is directly being linked for improving the standards of living in form of higher…

Q: Consider the model of unemployment with job separation rate s = 0.05 and job finding rate f = 0.20.…

A: The natural rate of unemployment is the amount of unemployment that happens when the labor market is…

Q: 18. Labor unions can lead to: a. an increase in hysteresis. b. an increase in cydical unemployment.…

A: In a labor market, a union can lead to higher wage demand and the employers thus are forced to…

Q: 4. Sectoral shifts, frictional unemployment, and job searches The Suppose the world price of tobacco…

A: Unemployment is a situation in which a person who is able to and willing to work is not able to find…

Question

7. Suppose the government decides to reduce the marginal income tax rate across all income
brackets, effectively making it more attractive for workers to provide their labor.
a. Use the labor market diagram model to illustrate this shock; be sure to label your initial
equilibrium and your new equilibrium.
b. Assuming the population and the labor force are held constant, explain what the effect of
the shock is on wages, the employment-to-population ratio and unemployment.
c. If we did not hold the labor force constant, how might your answer to part b change?
d. Suppose that wages are rigid and do not immediately adjust to the shock. How might this
impact unemployment in the short-run?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Define Labour Market

VIEW

Step 2: a. Examine the change using a graph

VIEW

Step 3: b. Analyze the effects of constant population and labor force.

VIEW

Step 4: c. Examine the effects if the labor force is variable

VIEW

Step 5: d. Explain the effects if the wage rate is rigid and doesn't adjust to the shock

VIEW

Solution

VIEW

Step by step

Solved in 6 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

16. Suppose that the government imposes a minimum wage of $7. Then, the size of labor force will be people, the number of people employed will be. , and the number of people unemployed will be. a. labor force = 50, employment = 30, unemployment = 20 b. labor force = 50, employment = 50, unemployment = 0 c. labor force = 70, employment = 30, unemployment = 40 d. labor force 70, employment = 50, unemployment = 20
Answer both parts. (a) For any given job, how do the economy-wide labour market conditions affect a worker's bargaining power? Explain which labour market variable you would look at to assess labour market conditions. (b) Suppose that for given labour market conditions, worker bargaining power throughout the economy increases. Discuss, using diagrams, what effect this would have on the real wage and levels of unemployment and output in the short run and in the medium run.
4. Consider the Keynesian Efficiency Wage Model. a. Draw the effort curve as it was discussed in class and explain the shape. b. Explain and show graphically how firms set real wages in the Keynesian Efficiency Wage model?
Suppose that the United States cracks down on illegal immigrants and returns millions of workers to their home countries. Draw a labor supply curve and a labor demand curve for the United States. Label the curves LS, and LDO Draw a point to show the equilibrium quantity of labor and the equilibrium real wage rate. Label it 1. Now suppose the United States returns millions of illegal immigrant workers to their home countries. Draw and label a curve that shows the effect of this return of workers. Draw a point to show the new equilibrium quantity of labor and the equilibrium real wage rate. Label it 2.
2. The natural rate of unemployment Suppose that the markup of goods prices over marginal cost is 5%, and that the wage-setting equation is w - P(1 - u), where u is the unemployment rate. a. What is the real wage, as determined by the price-setting equation? b. What is the natural rate of unemployment? c. Suppose that the markup of prices over costs increases to 10%. What happens to the natural rate of unemployment? Explain the logic behind your answer.
Consider a simple model where workers can be either employed or unemployed. Suppose the labour force is L= 100 million workers, the job separation rate is 2% per month and the job finding rate is 38% per month. Which of the following is true? A. In steady state, 5 million workers are unemployed B. All of the other options C. In steady state, 38 million workers are employed D. In steady state, there are more workers losing their jobs than there are unemployed workers finding a job
10 DRAW A GRAPH. WITHOUT GRAPH THUMBS DOWN!Suppose the markup of goods prices over marginal cost is 2% and the wage-setting equation is W=P(1-u) with u being the unemployment rate.1. What is the Natural level on Unemployment?2. What is the real wage as determined by the price setting equation?3. If the markup increases to 2.5% due to an increase in the price of Oil what happens to the natural rate of employment? Explain briefly and graphically this change.
answer oll parts
Structural unemployment is the unemployment that arises ____________. A. when wage rigidity creates a persistent gap between labor supply and labor demand. B. from workers' imperfect information about available jobs. C. during recessions when the unemployment rate is above the natural rate. D. from the average of the unemployment rates over an extended period of time.
Could you help me with my macroeconomics question? Thanks :)
Unemployment rates are spread evenly over segments of the population in different education categories. Asses the validity of this statement. True, unemloyment is a macroeconomic phenomenon affecting all of us equally False, higher levels of education are associated with lower unemployment rates as well as higher wages True, unemployment even influences highly educated and skilled workers as jobs become automated False, individuals without specialized skills can find jobs more easily since they can perform general tasks that are needed in many sectors.
please answer question C & D