Author Question: Minimum wage laws have little or no effect in this segment. a. Low-skilled Labor b. Teenagers c. ... (Read 58 times)

savannahhooper · **on:** Jun 30, 2018

Minimum wage laws have little or no effect in this segment.
a. Low-skilled Labor
b. Teenagers
c. Highly skilled workers
d. Unemployed workers

Question 2

How does the multiplier work and what might government use it for?

Gabe · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

c

Answer to Question 2

The initial purchase of goods or services (by government) results in income for the recipient, who in turn spends much of that income, but generally not all of it. This sets off a chain of actions based on each spending event results in an income event for someone else, who in turn spends some percentage of the dollars (even though the dollar amounts are shrinking).

Government may use this knowledge to target its spending in ways or places that lead to a boost in aggregate demand, creating a new short-run equilibrium at a higher level of real output.