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- Assume that the economy is in a recession and demand for labor is falling. Assume that wages are sticky. Draw a supply and demand graph that represents the labor market. Draw a graph that depicts what has happened to our demand and supply curves in the labor market, including our new equilibrium price and quantity of labor. Will the market experience an increase or a decrease in unemployment? Make sure you clearly label your graph, all of its components, and any curve shifts are clearly marked with the beginning and ending curves (you can use 0 and 1 or 1 and 2 to designate the first and the second curves).Look at the graph below. Labor demand falls from D0 to D1 due to an economic recession. What is the resulting wage in the short-run due to this shift in demand? HINT: Consider whether this is a situation in which the wages are sticky or flexible. Wage $? Look at the graph below. Labor demand falls from D0 to D1 due to an economic recession. What is the resulting wage in the short-run due to this shift in demand? HINT: Consider whether this is a situation in which the wages are sticky or flexible. 40 35 30 Wage Rate 25 20 15 10 5 0 DO DI 5 10 15 20 25 30 35 40 Quantity of LaborExplain why in the medium run an increase in the price of oil will cause an increase in the unemployment rate.
- Explain why the general level of wages is high in the United States and other industrially advanced countries. What is the single most important factor underlying the long-run increase in average real-wage rates in the United States?Suppose that a country experiences a reduction in productivity – that is, an adverse shock to the production function.A) What happens to the labor demand curve? Show the change on the graph.B) How would this change in productivity affect the unemployment rate if the labor market is always in equilibrium?Explain your answer referring to the graph.Explain how the changes in wages can affect equilibrium.
- What happens to employment in a competitive firm that experiences a technology shock such that at every level of employment its output is 200 units per hour greater than be fore?In 2014, some European countries were dealing with a recession. Workers who were laid off in those countries due to the economic downturn would beExplain how equilibrium wages and employment change in the economy when there is an increase in the number of working-age immigrants. Be clear on the short-run and long-run response.
- Describe the two possible effects that an increase in the wage rate can have on labor supply. Which effect do you expect to dominate under normal circumstances?“When computers were first introduced in production, what affect do you think they had on labor productivity? Explain and illustrate this effect on the long-run equilibrium levels of output and the price level.”The rate of job separations in the economy is 0.013 (1.3 percent) and rate of job finding is 0.25 (25 percent). a) If the economy has 500 workers in the labor force, calculate the unemployment rate and the number of unemployed in the steady state. b) If the rate of job separations is 1 percent, what happens to the unemployment rate and the number of unemployed in the steady state? c) If labor force suddenly increases by 20 workers who are seeking work (and the rate of job separations remains at 1 percent), what is the immediate change in the unemployment rate? What is the new steady-state unemployment rate? Draw a graph on how unemployment rate evolves in time.