Graph Input Tool Labor Market Labor Supply IWage Rate (Dollars per hour) $8.7 12 Labor Demanded (Thousands of workers) Labor Supplied (Thousands of workers) 420 580 Surplus Labor 7housands of workers) 160 Labor Demand Labor Demand Shifters Тех Credit (Dollars per hour) 200 400 600 1000 QUANTITY (Thousands of workers) Suppose the minimum wage in this economy is s8.70 per hour. An unemployed worker is defined as someone who is willing to work at the prevailing wage but is unable to find employment. Because the minimum wage lies above the equilibrium wage, it is binding, which means it is also the prevailing wage. Ir the wage is not allowed to fall below $8.70 per hour, the size of the unskilled labor force is ]workers, and unskilled workers are considered unemployed. The unemployment rate is defined as the percentage of unemployed workers in the labor force: Unemployment Rate = nploed Later Fon x 100 WAGE (Dollars per hour)
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- While economists measure unemployment at the macroeconomic level, microeconomic forces are often responsible for this macro aggregate. In other words, the tie between microeconomics and macroeconomics is inevitable when discussing the level of unemployment in an economy. Suppose the following graph represents the market for unskilled labor in a fictional economy. These workers typically represent the young, inexperienced, or uneducated part of the labor force and are therefore most effected by changes in the unemployment rate. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graphEconomists use labor-market data to evaluate how well an economy is using its most valuable resource—its people. Two closely watched statistics are the unemployment rate and the employment–population ratio (calculated as the percentage of the adult population that is employed). Indicate what happens to the unemployment rate and the employment–population ratio in each of the following scenarios. Scenario Effect On... UNEMPLOYMENT RATE EMPLOYMENT POPULATION RATION Many previously laid-off workers find jobs in new startup firms as the economy expands. (DECREASE, INCREASE OR STAY THE SAME) (DECREASE, INCREASE OR STAY THE SAME) After an unsuccessful search, some laid-off workers decide to go back to school as full-time students. (DECREASE, INCREASE OR STAY THE SAME) (DECREASE, INCREASE OR STAY THE SAME) As a result of an economic boom, many students drop out of school and start working as soon as they become adults. (DECREASE,…Economists use labor-market data to evaluate how well an economy is using its most valuable resource—its people. Two closely watched statistics are the unemployment rate and the employment–population ratio (calculated as the percentage of the adult population that is employed). Indicate what happens to the unemployment rate and the employment–population ratio in each of the following scenarios. Scenario Effect On... Unemployment Rate Employment–Population Ratio An auto company goes bankrupt and lays off its workers, who immediately start looking for new jobs. After an unsuccessful search, some laid-off workers quit looking for new jobs. Numerous students graduate from college and immediately begin new jobs. Advances in health care prolong the lives of many retirees.
- Economists use labor-market data to evaluate how well an economy is using its most valuable resource— its people. Two closely watched statistics are the unemployment rate and the employment–population ratio (calculated as the percentage of the adult population that is employed). Explain what happens to each of these in the following scenarios. In your opinion, which statistic is the more meaningful gauge of how well the economy is doing? Situations unemployment rate employment–population ratio More meaningful one a. An auto company goes bankrupt and lays off its workers, who immediately start looking for new jobs b. After an unsuccessful search, some of the laid-off workers quit looking for new jobs. c. Numerous students graduate from college but cannot find work. d. Numerous students graduate from college and immediately begin new jobs. e. A stock market boom induces newly enriched 60-year-old workers to take early retirement.…Does it make sense that the definition of macroeconomic equilibrium allows the existence of involuntary unemployment? Would you not expect that, in such a case, wages would fall, which would lead to an increase in the demand for labor and hence the elimination of the involuntary unemployment?Q1). Suppose the labor market is initially at its equilibrium, i.e., the labor supplied equals the labor demanded. Now suppose IBM develops a new computer chip that makes computer incredibly faster. Explain and show graphically how the arrival of a new, more productive technology affects the labor market. Draw the full graph and provide a detailed explanation of the effect. Label the axes/curves, explain why either the aggregate labor demand curve or the aggregate labor supply curve shifts and describe the economic mechanism that moves the economy from the old to the new equilibrium.
- The data shows that an increase in the Provincial Minimum Wage of 60% in City A in 1999 did not lead to an increase in unemployment. On the other hand, the same amount of increase in the Provincial Minimum Wage in City B actually causes the number of unemployed to increase. According to one economist, this is because the calculation of the increase in the Provincial Minimum Wage in City B does not pay attention to the amount of wages that should apply, so that it is burdensome for entrepreneurs and they are forced to lay off their workers. You are asked to provide a theoretical basis (with a labor supply-demand curve) why an increase in the minimum wage in City A and City B, despite having similar increases, has different effects.Typically, even at similar stages of the economic cycle, the unemployment rate in several West European countries is higher than in the United States. To what extent can the above observation possibly be linked or not with the fact that in Europe: (1) the unionization rate is higher (2) laws often make it more difficult to lay off people, (3) collective bargaining is more or less centralized, (4) unemployment insurance programs are relatively more generous.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).
- The labour market in an economy is characterised by the following equations: W = 0.7-0.9u ре Wage setting: W = 0.5 P Price setting: In which W is nominal wages, pe and P are expected nominal prices and nominal prices, respectively, u is level of unemployment. Consider a linear production function for firms such that Q = N, i.e., production for firms (Q) depends only on the number of employees (N). Considering this information, which of the following statements are CORRECT: U The price mark-up (u) for this economy is 1 (i.e. µ = 1). O If actual output is below potential output, actual unemployment rate is below 0.22, (i.e. uț < 0.22). The equilibrium unemployment in this economy is 0.22 (i.e. ue = 0.22). U If wage setters become less responsive to changes in unemployment (e.g., from -0.9 to -0.7), the equilibrium unemployment decreases.Consider the labour market represented in the following graph: real wage W P equilibrium employment WS PS Employment rate Where WS represents the Wage Setting relationship, and PS represents the Price Setting relationship. Which of the following statements are INCORRECT? Changes in the marginal product of labour will change the equilibrium level of unemployment because it makes the wage setting (WS) curve shift. A non-labour related increase in cost of production, will shift the PS curve downwards. The PS curve is horizontal because changes in prices do not affect the rate employment in the economy. A positive demand shock that increases actual output will move the equilibrium employment to the right of the point E in the graph.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.