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 prevailingwage but is unable to find employment. Because the minimum wage lies above the equilibrium wage, it is binding, which means it is also theprevailing wage.If the wage is not allowed to fall below $8.70 per hour, the size of the unskilled labor force isworkers are considered unemployed.The unemployment rate is defined as the percentage of unemployed workers in the labor force:Unemployment Rate =At a minimum wage of $8.70 per hour, the unemployment rate among unskilled workers is approximatelyUnemployedx 100Labor ForceTrueFalseworkers, andRecall that according to the article, a bill moving through the legislature would allow small businesses in Illinois to collect a tax credit to offset theadditional cost of a higher minimum wage. The previous graph shows an initial tax credit of $0. For simplicity, assume that small businesses are theprimary demanders of unskilled workers, and they would receive a tax credit equating to $1 per hour.True or False: With a minimum wage of $8.70, unemployment of unskilled workers is higher with the tax credit versus without it.unskilled 2. The connection between macroeconomics and microeconomicsWhile economists measure unemployment at the macroeconomic level, microeconomic forces are often responsible for this macro aggregate. In otherwords, the tie between microeconomics and macroeconomics is inevitable when discussing the level of unemployment in an economy.Suppose the following graph represents the market for unskilled labor in a fictional economy. These workers typically represent the young,inexperienced, or uneducated part of the labor force and are therefore most effected by changes in the unemployment rate.Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.WAGE (Dollars per hour)12a.n0400Labor SupplyLabor Demand200600800QUANTITY (Thousands of workers)1000Graph Input ToolLabor MarketWage Rate(Dollars per hour)Labor Demanded(Thousands ofworkers)Surplus Labor(Thousands ofworkers)Labor Demand ShiftersTax Credit(Dollars per hour)$8.7420160Labor Supplied(Thousands ofworkers)560

While economists measure unemployment at the macroeconomic level, microeconomic forces are often responsible for this macro aggregate. In other words, the tie between microeconomics and macroeconomics is inevitable when discussing the level of unemployment in an economy. Suppose the following graph represents the market for unskilled labor in a fictional economy. These workers typically represent the young, inexperienced, or uneducated part of the labor force and are therefore most effected by changes in the unemployment rate. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Labor Supply Graph Input Tool. Labor Market Wage Rate (Dollars per hour) $8.7

While economists measure unemployment at the macroeconomic level, microeconomic forces are often responsible for this macro aggregate. In other words, the tie between microeconomics and macroeconomics is inevitable when discussing the level of unemployment in an economy. Suppose the following graph represents the market for unskilled labor in a fictional economy. These workers typically represent the young, inexperienced, or uneducated part of the labor force and are therefore most effected by changes in the unemployment rate. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Labor Supply Graph Input Tool. Labor Market Wage Rate (Dollars per hour) $8.7

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Laffer Curve Analysis

In terms of economics, the Laffer curve was popular among those economists who were or who belonged to the supply side of the economic peripheral. This concept was popularized by the famous supply-side economist known as Arthur Laffer. This curve illustrated the relationship between the tax rates and government revenue. It is already known that the tax which the public or individuals residing in an economy bear is the revenue or income of the government with the help of which the government does all the necessary works in the society, which is beneficial for the economy.

Question

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 =
At a minimum wage of $8.70 per hour, the unemployment rate among unskilled workers is approximately
Unemployed
x 100
Labor Force
True
False
workers, and
Recall that according to the article, a bill moving through the legislature would allow small businesses in Illinois to collect a tax credit to offset the
additional cost of a higher minimum wage. The previous graph shows an initial tax credit of $0. For simplicity, assume that small businesses are the
primary demanders of unskilled workers, and they would receive a tax credit equating to $1 per hour.
True or False: With a minimum wage of $8.70, unemployment of unskilled workers is higher with the tax credit versus without it.
unskilled

2. The connection between macroeconomics and microeconomics
While economists measure unemployment at the macroeconomic level, microeconomic forces are often responsible for this macro aggregate. In other
words, the tie between microeconomics and macroeconomics is inevitable when discussing the level of unemployment in an economy.
Suppose the following graph represents the market for unskilled labor in a fictional economy. These workers typically represent the young,
inexperienced, or uneducated part of the labor force and are therefore most effected by changes in the unemployment rate.
Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.
Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
WAGE (Dollars per hour)
12
a
.
n
0
400
Labor Supply
Labor Demand
200
600
800
QUANTITY (Thousands of workers)
1000
Graph Input Tool
Labor Market
Wage Rate
(Dollars per hour)
Labor Demanded
(Thousands of
workers)
Surplus Labor
(Thousands of
workers)
Labor Demand Shifters
Tax Credit
(Dollars per hour)
$8.7
420
160
Labor Supplied
(Thousands of
workers)
560

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2 In The Hightower Lowdown (Voiume 12, Number 5, May 2010) you could read: 5 MILLION PEOPLE (about 10% of the workforce) are out of work • UNEMPLOYMENT IS HEAVILY SKEWED BY CLASS. Among the wealthiest 10% of American families (incomes above $150,000), only 3% are unemployed - a jobless rate that rises as you go down the income scale. Among the bottom 10%, more than 30% are out of work. [R178] What average unemployment rate for the middle 80% of families fits with the given values for the top and bottom 10% to work out to the overall (weighted) average unemployment rate of 10%?
Suppose the world price of cotton falls substantially. The demand for labor among cotton-producing firms in Texas will The demand for labor among textile-producing firms in South Carolina, for which cotton is an input, will . The temporary unemployment resulting from such sectoral shifts in the economy is best described as unemployment. Suppose the government wants to reduce this type of unemployment. Which of the following policies would help achieve this goal? Check all that apply. O Improving a widely used job-search website so that it matches workers to job vacancies more effectively O Offering recipients of unemployment insurance benefits a cash bonus if they find a new job within a specified number of weeks O Increasing the benefits offered to unemployed workers through the government's unemployment insurance program
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.
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.
The following scenarios have been taken from actual answers to the Current Population Survey conducted by the Bureau of Labor Statistics. In each case classify the individual as either employed, unemployed, or not in the labor force. 1. Veronica attends Neptune Nigh School full-time. She also works part-time for pay at the North Star Cafe after school.
Suppose an economy is experiencing the following rates of unemployment by type. Rate (%) Cyclically Unemployed 1.5 Frictionally Unemployed 3.3 Structurally Unemployed 2.6 The actual unemployment rate is Multiple Choice 7.4 percent and the natural rate of unemployment is 5.9 percent. 5.9 percent and the natural rate of unemployment is 7.4 percent. 7.4 percent and the natural rate of unemployment is 10.1 percent. 10.1 percent and the natural rate of unemployment is 7.4 percent
FILL IN THE BLANKS The government utilizes fiscal policies to stimulate aggregate demand and reduce this type of unemployment. When the government subsidizes programs to train workers in new skills because of changes in technology, it is trying to reduce the amount of unemployment. If the government reduces the number of weeks an unemployed worker can collect unemployment insurance payments, then it is likely that unemployment numbers would decrease. There is a relationship between a nation’s unemployment rate and its production which is represented by Okun’s Law. The law predicts that that for every 1% increase in unemployment there will be a decrease in gross domestic product (GDP).
Book: MacroeconomicSteinar, holden, osloCappelen damm academic,2016