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Author Question: When the dollar depreciates relative to the pound, the pound price of the dollar A) increases. ... (Read 185 times)

fasfsadfdsfa

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on: Jun 30, 2018
When the dollar depreciates relative to the pound, the pound price of the dollar
 
  A) increases.
  B) decreases.
  C) does not change.
  D) increases or decreases, depending on the amount of the depreciation.
  E) changes in the next period.

Question 2

Graphically illustrate (using the WS and PS relations) and explain the effects of a reduction in the minimum wage on the equilibrium real wage, the natural rate of unemployment, the natural level of employment, and the natural level of output.
 
  What will be an ideal response?


princessflame2016

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Reply #1 on: Jun 30, 2018
Answer to Question 1

B

Answer to Question 2

A reduction in the minimum wage will cause the nominal wage based on wage setting behavior to decrease; this is represented as an downward shift in the WS relation. As the nominal wage deceases, firms will respond by reducing the price level so we will observe no change in the equilibrium real wage. We will observe a decrease in the natural rate of unemployment and an increase in both the natural level of employment and output.


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