Principles of Macroeconomics (12th Edition)
12th Edition
ISBN: 9780134078809
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 13, Problem 2.1P
To determine
Labor market changes in the absence of sticky wages
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What are the effects of the exchange rate on the labor market in classical neoclassical and Keynesian theories?
Do you think it is rational for workers to prefer sticky wages to wage cuts, when the consequence of sticky wages is unemployment for some workers? Why or why not? How do the reasons for sticky wages explained in this section apply to your argument?
Compare how the Keynesian School and the Classical School answer the questions on why do fluctuations in the unemployment rate exist, if perfectly competitive labour markets should naturally adjust with changes in capital investments?
Chapter 13 Solutions
Principles of Macroeconomics (12th Edition)
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- Discuss classical theory of unemploymentarrow_forwardBriefly discuss why more migrants do not always lead to lower wages? Use the classical model of the labor market to support your line of argumentation and show also graphically how migration can affect labor demand and labor supply? the equilibrium level of employment and the equilibrium wage rate?arrow_forwardWhy do economists think the classical dichotomy holds in the long run?arrow_forward
- Select all that apply to the classical view of economics: A. Assumes flexible price and wages B. Savings depends on interest rates C. Investment depends on interest rates D. Investment depends on profit expectations E. Wait for Long Runarrow_forwardSuppose labor demand decreases because of negative supply shock. How would you expect such a change to affect output, employment, and the real wage in the classical model?arrow_forwardUsing the labor market, production function. and AS/AD graphs of the classical model, show the effects of an increase in the labor supply. What are the effects on real wages, the quantity of labor, real GDP, and prices? Explain and show graphically.arrow_forward
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