What are the unintended consequences of raising minimum wage? Explain why these consequences would happen.
What will be an ideal response?
Significant increases in minimum wage tend to create unemployment. The main reason for this is that an increase in minimum wage makes production costs higher. As a result, companies are forced to raise the prices of their products. However, consumers will notice this and many will refuse to buy a product at a higher price. Therefore, rather than raising product prices too high, companies would probably replace low-skilled worker earning the minimum wage with technological advances, such as robots. Because of this, many people will become unemployed.
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The security provided by the federal government on money in banks is called
A) deposit insurance. B) a hedge fund. C) Social Security. D) investment equity.
Using the Taylor rule, if the current inflation rate equals the target inflation rate and real GDP equals potential GDP, then the federal funds target rate equals the
A) current inflation rate plus the real equilibrium federal funds rate. B) real equilibrium federal funds rate. C) current inflation rate. D) current discount rate.