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.
Chapter15: Fiscal Policy
Section: Chapter Questions
Problem 10SQP
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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
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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