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.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter15: Macroeconomic Viewpoints: New Keynesian, Monetarist, And New Classical

Section: Chapter Questions

Problem 4E

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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.

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