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a. What is the theorized relationship between the
b. How should the unemployment rate respond to a constant minimum wage in the static model of the labour market?
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- 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.Look at the graph below. Labor demand falls from D0 to D1 due to an economic recession. What is the resulting wage in the short-run due to this shift in demand? HINT: Consider whether this is a situation in which the wages are sticky or flexible. Wage $? Look at the graph below. Labor demand falls from D0 to D1 due to an economic recession. What is the resulting wage in the short-run due to this shift in demand? HINT: Consider whether this is a situation in which the wages are sticky or flexible. 40 35 30 Wage Rate 25 20 15 10 5 0 DO DI 5 10 15 20 25 30 35 40 Quantity of LaborAssume that a labor market can be described by the functions Ld 100 – 2w and Ls = 10 + 3w. Then assume the government imposes a $20 minimum wage, calculate: it may be helpful) i. amount of unemployment created and the amount of actual job loss as a result of the minimum wage. ii. the unemployment rate in society. (No graph is needed, but
- Consider the labour market represented in the following graph: real wage W P equilibrium employment WS PS Employment rate Where WS represents the Wage Setting relationship, and PS represents the Price Setting relationship. Which of the following statements are INCORRECT? Changes in the marginal product of labour will change the equilibrium level of unemployment because it makes the wage setting (WS) curve shift. A non-labour related increase in cost of production, will shift the PS curve downwards. The PS curve is horizontal because changes in prices do not affect the rate employment in the economy. A positive demand shock that increases actual output will move the equilibrium employment to the right of the point E in the graph.Suppose the minimum wage in this economy is $8.70 per hour. An unemployed worker is defined as someone who is willing to work at the prevailing wage but is unable to find employment. Because the minimum wage lies above the equilibrium wage, it is binding, which means it is also the prevailing wage. If the wage is not allowed to fall below $8.70 per hour, the size of the unskilled labor force is workers are considered unemployed. The unemployment rate is defined as the percentage of unemployed workers in the labor force: Unemployment Rate = Unemployed Labor Force x 100 At a minimum wage of $8.70 per hour, the unemployment rate among unskilled workers is approximately workers, and unskilled 4The labour market in an economy is characterised by the following equations: Wage setting: Price setting: W p² W Р = 0.9-0.5u = 1 1+µ -A In which W is nominal wages, pe and P are expected nominal prices and nominal prices, respectively, u is level of unemployment. µ is the price mark-up and λ is the marginal product of labour. Assume μ = 0.3 and λ = 1.1 Considering this information, which of the following statements are CORRECT: Improvement in working conditions will have no effects in the equilibrium level of unemployment in this economy. If this economy's actual output is below its potential output, there is pressure for real wages to decrease below 0.85 (i.e., W<0.85). If price marginal product of labour decreases to 1, the equilibrium real wage in this economy will decrease. A positive demand shock will change the equilibrium variables in this economy.
- 1) As the unemployment rate rises: A) the separation rate decreases. B) the young and unskilled experience lower-than-average increases in unemployment. C) the young and skilled experience larger-than-average increases in unemployment. D) the young and unskilled experience larger-than-average increases in unemployment. E) the proportion of the unemployed finding a job increases.Assume that the labour demand equation for a fictional country is L = 90 – 2(w), where w is the wage per hour worked. Also, assume that the labour supply equation for that country is Ls = 0.5(w). Instructions: Round your answers to the nearest whole number. a. The equilibrium wage is $ , and the equilibrium quantity of labour employed is workers. b. At the equilibrium wage, | people are unemployed. c. If the supply of workers increased, the number of unemployed would: O stay the same as long as the wage is free to quickly adjust. O decrease. O increase.The diagram on the right shows a perfectly competitive labour market. The initial equilibrium is with wage w* and employment L*. a. Suppose the demand for labour decreases to D'L. If wages are perfectly flexible, what is the effect on the wages and employment? If wages are perfectly flexible, wages will decrease decrease and employment will Use the point drawing tool to plot the new equilibrium point. Carefully follow the instructions above, and only draw the required object. Real Wage Part a Employment OU
- Explain why employers pay a lower efficiency wage when unemployment is high. How would the efficiency wage change in an economy if it became easier to monitor the work that employees did? Other than to incentivise workers to put in effort, can you think of any other reasons why wages might be higher when unemployment is low (i.e. an upward-sloping wage-setting curve)?What is the relationship between unemployment and the price level in the short run?The estimate of the current natural rate of unemployment rate in the United States is approximately Select one: a. 0 percent. b. 0.5 percent. c. 10 percent. d. None of these.
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