Suppose the government raises the minimum wage in the economy. All else constant, how will this affect the quantity of labor demanded and the quantity of labor supplied?
What will be an ideal response?
The increase in the real wage will increase the marginal cost of labor and firms will therefore hire fewer workers (a decrease in the quantity of workers demanded). Since more people would be willing to work at a higher real wage, the quantity of labor supplied should increase.
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Fluctuating interest rates tend to cause large changes in real output when the
A) IS curve is flat. B) IS curve is steep. C) LM curve is flat. D) LM curve is steep.
Public choice analysis indicates that elected political officials will find debt financing
a. unattractive because voters will recognize that excessive debt will lead to the future collapse of the economy. b. attractive because countries with a higher debt to GDP ratio generally grow more rapidly. c. unattractive because both politicians and voters will recognize that a larger outstanding debt will mean higher future taxes. d. attractive because current spending can provide voters with highly visible goods, services, and transfer payments, while borrowing will push the most visible cost of this spending into the future.