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Author Question: What determines the demand for labor, the supply of labor, and labor market equilibrium? What ... (Read 113 times)

tiffannnnyyyyyy

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on: Jun 29, 2018
What determines the demand for labor, the supply of labor, and labor market equilibrium?
 
  What will be an ideal response?

Question 2

How will an increase in the government budget surplus as a result of lower government spending (with no change in net taxes) affect private saving in the economy?
 
  A) Private saving will increase by the amount of increase in the budget surplus.
  B) Private saving will be unaffected by the increase in the budget surplus.
  C) Private saving will decrease by less than the amount of increase in the budget surplus.
  D) Private saving will decrease by the amount of increase in the budget surplus.


ririgirl15

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Reply #1 on: Jun 29, 2018
Answer to Question 1

The demand for labor is the relationship between the quantity of labor demanded and the real wage rate. A fall in the real wage rate increases the quantity of labor demanded because of diminishing returns. The demand for labor also depends on productivity. If productivity increases, the demand for labor increases.
The supply of labor is the relationship between the quantity of labor supplied and the real wage rate. An increase in the real wage rate increases the quantity of labor supplied because more people enter the labor force and the hours supplied per person increases.
The real wage adjusts so that the labor market is in equilibrium. If the real wage rate is above (below) its equilibrium, there is a surplus (shortage) of labor that then causes the real wage rate to fall (rise). For example, if the real wage rate is above the equilibrium level, there is a surplus of labor so the real wage rate falls until it reaches its equilibrium. The equilibrium quantity of employment is the full employment quantity of labor.

Answer to Question 2

C


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