Real wage WS PS Output Figure 1 The supply side of the economy Consider Figure 1, which represents the supply side of the economy. Which of the following statements correctly describe the economy if it is at point X in the diagram. (Select one or more answers) Select one or more: O A. There is a temporary rise in workers' real wage. O B. There is a temporary fall in workers' real wage. O c. There is a negative output gap and inflation is falling. O D. There is a negative output gap and inflation is constant.

Identify the most accurate statement. A price floor will have live largest effect if it is set: substantially above the equilibrium price slightly above the equilibrium price slightly below the equilibrium price substantially below the equilibrium price

Are households demanders or suppliers in the goods market? Are firms demanders or suppliers in the goods market? What about the labor market and the financial market?

In the labor market, what causes a movement along the supply curve? What causes a shift in the supply curve?

Explain what economists mean by menu costs.

Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Sketch a demand and supply diagram to support your answers. The number of people at the most common ages for home-buying increases. People gain confidence that the economy is growing and that their jobs are secure. Banks that have made home loans find that a larger number of people than they expected are not repaying these loans. Because of a threat of a war, people become uncertain about their economic future. The overall level of saving, in the economy diminishes. The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.

Suppose that a 5 increase in the minimum wag causes a 5 reduction in employment. How would this affect employment and how would it affect workers? In your opinion, would this be a good policy?

What is the difference between the price level and the tale of inflation?

Assume that the supply of law-skilled worker is fairly elastic, but the employers demand for such workers is fairly inelastic. If the policy goal is to expand employment for low-skilled workers, is it better to focus on policy tools to shift the supply of unskilled labor or on tools to shift the demand for unskilled labor? What if the policy goal is to raise wages for this group? Explain your answer with supply and demand diagrams.

As a general rule, is it safe to assume that a change in the price of a good will always have its most significant impact on the quantity demanded of that good, rather than on the quantity demanded of miller goods? Explain.