Which one of the following statement is correct: The labour supply curve is downward sloping because the price of leisure decreases when wages are higher. O The intersection of labour supply and demand always determines the level of employment in the economy. Usually the youth unemployment rate is lower than the aggregate unemployment rate because there are less young individuals willing to work. O labour income taxes create distortions in the labour market. If wages are rigid, imposing taxes will not affect the level of employment in equilibrium
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- Explain how equilibrium wages and employment change in the economy when there is an increase in thenumber of working-age immigrants. Be clear on the short-run and long-run response.b) Suppose that some of the immigrants set up businesses rather than become employees. Explain howyou expect this to affect the wage-setting curve, the price-setting curve and the labour market equilibrium.c) Answerbriey, do the results you have obtained in (a) and (b) suggest that immigration is good for theeconomy?Real wage Cabor supply Labor (hours) Preferences Time preference: 100 O A flattening of the labor supply curve due to a higher labor supply elasticity OA steepening of the labor supply curve due to a lower labor supply elasticity Smoothing: 100 Will to substitute: 105 Consumption weight: 10 Prices and assets Initial assets: 100 Wage rate: 100 Interest rate: 100 Price level: 100 Inflation rate: 100 The following question will be about the labor supply curve. Remember, the labor supply curve plots hours worked on the x-axis and the real wage on the y-axis. Which of the following would happen as a result of an increase in households' willingness to substitute between consumption and leisure? O An upward movement along the curve and an increase in the log of hours worked O A downward movement along the curve and a decrease in the amount of hours worked O None of theseTo say that the demand for labor is a derived demand means that the demand for labor depends upon the demand for the product produced by labor O the supply of labor rises when the demand for labor falls changes in the demand for labor lead to changes in the demand for the product produced by labor the quantity of labor is derived by the real wage rate
- What would be the predicted impact on the labor market of a decrease in non-wage income, as well as an increase in the price of machines? a. An increase in equilibrium wage, and an indeterminate change in equilibrium quantity of labor. b. A decrease in equilibrium wage, and an indeterminate change in equilibrium quantity of labor. C. An indeterminate change in equilibrium wage, and an increase in equilibrium quantity of labor. O d. An indeterminate change in equilibrium wage, and a decrease in equilibrium quantity of labor.4. Consider the Keynesian Efficiency Wage Model.if the wage gap falls, then unemployment is like to fall O True O False
- QUESTION 15 The graph below refers to a significant increase in individual income taxes, taking them to their highest level in 50 years. Which of the following is likely to result? Price Level P₁ P₂ Y₂ Y1 AD AS AD Real National Income O a. Increase in unemployment O b. Increase in inflationary pressure O c. Rising input prices O d. An increase in the natural rate of unemploymentWhat is the impact on the labour market due to a reduction in income tax rate? Select one: O a. labour demand shifts to the right; wage rate increases and level of employment increases O b. labour supply shifts to the right; wage rate decreases and level of employment is higher O c. labour supply shifts to the left; wage rate increases and level of employment is lower O d. labour demand shifts to the left; wage rate decreases and level of employment decreasesThe 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
- Consider an economy that experiences an outflow of working age people and a decline in aggregatelabour supply as a result. Suppose the aggregate labour demand curve is not affected by this change.(a) Explain, with the aid of the labour-market-equilibrium diagram, how this will affect the equilibriumreal wage and the full-employment level of employment. (b) Explain, with the aid of three separate IS-LM-FE diagrams, how this will affect real output, realinterest rate and the general price level in three steps:(i) before the general price level adjusts;(ii) when the general price level is adjusting;(iii) after the price adjustment process is completed.Is the general price level increasing or decreasing during the price adjustment process? Explain theintuition of your answer with reference to the AD-AS framework.For this question, assume that Y = N. Based on the wage setting-price setting model, we know that an increase in the minimum wage will cause A, a reduction in the natural level of output. O B. an increase in the natural level of output. Oca reduction in the equilibrium real wage. none of the choices is correct. D. an increase in the equilibrium real wage. E.QUESTION 18 The diagram below depicts the aggregate labour market. Why might the wage rate remain at W₁, and how would you label the distance b-a? Real wage rate W₁ 0 a AS₁ AD b Number of workers O a. The actions of trade unions explain why the wage will remain at W₁, b-a is frictional unemployment O b. The introduction of the minimum wage keeps the rate at W₁, b-a is frictional unemployment O c. The rate cannot stay at W₁, b-a is equilibrium unemployment O d. The efficiency wage hypothesis explains why the rate may stay at W₁, b-a is disequilibrium unemployment