a. Briefly explain how an effective minimum wage causes a structural unemployment. b. With the aid of a demand-and-supply diagram, illustrate the effect of an economic recession on a labour market with an effective minimum wage.

a. Briefly explain how an effective minimum wage causes a structural unemployment. b. With the aid of a demand-and-supply diagram, illustrate the effect of an economic recession on a labour market with an effective minimum wage.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter15: Fiscal Policy

Section: Chapter Questions

Problem 10SQP

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Question

Statutory Minimum Wage (SMW) has come into force since 1 May 2011 in Hong
Kong. The current SMW rate is $37.5 per hour.
a. Briefly explain how an effective minimum wage causes a structural
unemployment.
b. With the aid of a demand-and-supply diagram, illustrate the effect of an
economic recession on a labour market with an effective minimum wage.

Definition Definition State in which an individual is without work, despite actively seeking employment opportunities. The unemployment rate refers to the percentage of the workforce that is currently unemployed. Unemployment is one of the key indicators of the conditions prevailing in an economy. It is therefore considered a barometer that points out the condition of an economy.

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