Colleges and universities often do not pay salaries that are market-driven. For example, it is typical for a history professor to make the same as an economics professor. What kinds of problems are likely to result from this kind of a pay scale?
What will be an ideal response?
If the salary for the history professor is above the market-clearing level that he or she is likely to earn working anywhere else than that is going to result in an excess of applicants vis-à-vis the number of available positions (i.e. an excess supply of labor). In addition, if the salary paid to economists is lower than the going rate that economists could earn in the private sector then that will lead to a shortage of economics professors (i.e. and excess demand for labor).
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What will happen to unemployed retail workers if the government is unable to target stimulus spending at the retail sector?
A. Most will become discouraged and leave the labor force. B. They may eventually find work after government spending works its way through the economy. C. They may eventually find work after the Fed reduces tax rates, increasing household consumption spending. D. They will remain permanently unemployed unless they find work in another sector of the economy.
The "constant dollar" price is:
A) the real price of a good. B) the nominal price of a good adjusted for inflation. C) the "current dollar" price adjusted for inflation. D) all of the above E) none of the above