III. Use the WS and PS relations to examine the effects of the following events on the natural rate of unemployment and the real wage. Be sure to explain the effects of the event on the WS and PS relations. a. A new U.S. trade policy with the hope to protect American workers decreases international trade and makes product markets less competitive in the U.S. b. A new law that bans the formation of labor unions has been passed.

III. Use the WS and PS relations to examine the effects of the following events on the natural rate of unemployment and the real wage. Be sure to explain the effects of the event on the WS and PS relations. a. A new U.S. trade policy with the hope to protect American workers decreases international trade and makes product markets less competitive in the U.S. b. A new law that bans the formation of labor unions has been passed.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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.
D2
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