Suppose that the government increases a tax paid by employers for hiring workers (for example, Social Security). What are the likely effects on real wages, output and employment? What are the likely magnitudes of these effects?
What will be an ideal response?
The tax increases will shift labor demand to the left, so real wages and employment will each go down. As employment goes down, so will output. The likely magnitudes of these effects is less clear. If labor supply is near vertical, the effects on wages will be large, but the effects on employment and output will be small. If labor supply is near horizontal, the effects on wages will be small, but the effects on employment and output will be large.
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The purchasing power of the Zimbabwean dollar:
A. rose because when inflation rises, purchasing power rises. B. fell because there was more money chasing the same goods. C. rose because the money supply rose but real output did not. D. fell because people would not accept the newly-printed money.
A share of stock represents a claim on the
a. output of the firm b. firm's assets and earnings c. assets of the board of directors d. managers' incomes e. firm's future losses