Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 26, Problem 2TY
To determine
Determine real wage rate.
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Carefully explain why the price level are rigid in the short run (SR). Illustrate your answer using a real world example where a price of an item may not change for months even though the raw material cost to produce that item may change.
Suppose that a consulting firm has generated the following information about the economy of Growville:
(i) The current employment in export industries is 50,000;
(ii) The current total employment in the city is 150,000;
(iii) Export employment is expected to grow by 10,000 jobs.
a. Is there enough information to accurately predict the effect of the increase in export employment on total employment?
b. If you have enough information, predict the employment effect and illustrate your answer with a graph.
c. If there is insufficient information, proceed with the analysis as far as you can and list the additional information you need to complete the analysis. Illustrate your answer with a graph.
Suppose the marginal product of labor in the economy is given by MPN = 200 – 0.5N, while the supply of labor is 100 + 4w
Find the market-clearing real wage rate
What happens if the government imposes a minimum wage of 40? Is there involuntary unemployment?
What happens if the government imposes a minimum wage of 60? Is there involuntary unemployment?
Chapter 26 Solutions
Economics: Principles & Policy
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