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Author Question: How would the following factors affect equilibrium in the market for labor? a. An increase in the ... (Read 62 times)

DelorasTo

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on: Jun 29, 2018
How would the following factors affect equilibrium in the market for labor?
 
  a. An increase in the demand for the product that a firm is producing
  b. The use of a new technology that halves the time that workers will take to produce a good
  c. An increase in the age when people begin to receive Social Security benefits.

Question 2

If the economy is at full employment and the Fed increases the quantity of money, _______.
 
  A. aggregate demand increases, a recessionary gap appears, and the money wage rate starts to rise
  B. aggregate supply increases, the price level starts to fall, and an ex-pansion begins
  C. aggregate demand increases, an inflationary gap appears, and the money wage rate starts to rise
  D. potential GDP and aggregate supply increase together and the price level does not change


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ladyjames123

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

a. Since the demand for labor is derived from the demand for the final product that labor produces, the demand for labor will increase. Other things remaining unchanged, the demand curve will shift to the right and employment and the wage rate will increase.
b. This is an example of a labor-complementary technology. Since it increases workers' productivity, the labor demand curve will shift to the right. Other things remaining unchanged, employment and the wage rate will increase.
c. Increasing the Social Security age will increase the supply of labor as some people who would have dropped out of the labor force will now continue to work. This will shift the labor supply curve to the right. Other things remaining unchanged, the wage rate will fall and employment will increase.

Answer to Question 2

C An increase in the quantity of money can set off a demand-pull inflation by increasing aggregate demand, thereby creating an inflationary gap.


DelorasTo

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Reply 2 on: Jun 29, 2018
Wow, this really help

kswal303

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Reply 3 on: Yesterday
YES! Correct, THANKS for helping me on my review

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