Macroeconomics
10th Edition
ISBN: 9781319105990
Author: Mankiw, N. Gregory.
Publisher: Worth Publishers,
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Chapter 7, Problem 8PA
To determine
Income effect and substitution effect.
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Which of the following statements correctly describe discouraged workers? (If none of the choices apply, leave all of the checkboxes blank.) Check all that apply.
They are counted as part of the labor force by the Bureau of Labor Statistics.
They have given up on looking for a job.
They are dissatisfied with their current jobs and are considering quitting.
They have not looked for a job in 4 weeks (or longer), but they would like a job and are available for work.
The following table contains U.S. employment information from June 2019.
Civilian Population
Employed
Unemployed
Discouraged
(Persons 16 years old and over)
(Persons)
(Persons)
(Persons)
259,037,000
157,005,000
5,975,000
425,000
The Bureau of Labor Statistics has several measures of joblessness in addition to the official unemployment rate. One alternative is the U-4 measure of labor underutilization, which is calculated as follows:
U-4U-4
= =…
The Federal Reserve Bank of Atlanta releases its monthly Wage Growth Tracker to study trends in wages across various industries. One interesting issue is whether wages rise faster for those who stay in their current jobs (job stayers) or those who seek new opportunities (job switchers). According to the data, job stayers tend to do better than job switchers during a recession. But when the labor market is strong, job switchers experience higher wage growth than job stayers.
a. During a recession, job stayers do better than job switchers because
a.labor demand increases and job switchers can find jobs with higher wages.
b.labor supply decreases and job switchers can find jobs with higher wages.
c.labor demand decreases and job switchers cannot find jobs with higher wages.
b. When the labor market is strong, job switchers experience higher wages than job stayers because
a.labor demand decreases and job switchers cannot find jobs with higher wages.
b.labor supply…
Explain your answer comprehensively about the question stated below:
Suppose Congress were to mandate that all employers had to offer their employees a life insurance policy worth at least $50,000. Use Economic Theory and concepts, both positively and normatively, to analyze the effects of this mandate on employee well-being.
What effect does this mandate have on the demand for labor? Use also curve to demonstrate the answer.
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- Now suppose that there is mobility in the labour market in country Alpha and we are in the pre-minimum wage period. Country Alpha receives migrants from country Beta and these migrants are positively selected. Suppose country Alpha decides to adopt a welfare program to increase the minimum income of its workers. This minimum income is granted to all native workers, immigrant workers, and the new incoming immigrants. Using the Roy model, and ignoring how the program is funded, with the aid of a diagram, discuss how the welfare program changes the selection of the immigrant flow to country Alphaarrow_forwardConsider an economy that lacks any safety regulations. After a review of various incidences of workplace injuries, the government in this economy concludes that workers may not be optimally choosing jobs based on wages and safety. That is to say, workers seem to be accepting jobs that don't pay a high enough wage given the level of safety (or, put another way, jobs that aren't safe enough given the wage paid). This government is open to implementing new policies that would help workers make more optimal wage-safety choices. However, it strongly prefers avoiding the implementation of safety regulations on employers. For each of the following underlying causes of the wage-safety issue, describe a potential policy that could help resolve it. Given this government's aversion to implementing safety regulations, use "safety regulations" as a policy response to only one of these causes. a) Imperfect information among workers b) Imperfect competition between firms c) Workers experiencing the…arrow_forwardThe Economist article, Left in the Lurch, notes that throughout history many places that have experienced economic hardships have seen their residents leave. But, it notes that such "mobility" by workers from such places is _______ in the U.S. today. Part of this dynamic reflects policies that ______ population growth in more thriving communities (and thus make it more difficult for workers to relocate). Another part of this dynamic reflects public policies that often ______ the incentive to move. Choose the correct combination from the choices below. a. decreasing; enhance; increase b. increasing; restrict; reduce c. decreasing; restrict; reduce d. increasing; enhance; reducearrow_forward
- An individual's decision to supply her labor or to spend her time in leisure activity is known as the labor-leisure tradeoff. True or false?arrow_forwardin the McCall partial equilibrium model, if unemployed individual can only live for 10 periods. In each period, she will receive $400 if unemployed. The offered wage is uniformly distributed in the range of [500,1000] 1.what will the reservation wage be in the period 9 if the discount rate is 0.9? 2.what will the reservation wage be in the period 8 if the discount rate is 0.9?arrow_forwardWhen unemployment exists in the supply and demand labor market model, there is an adjustment that brings the model back into equilibrium—back to full employment. Orthodox economists cite two mechanisms that cause the adjustment. Explain each of these.arrow_forward
- what happens in the work-leisure model, when the wage rate is decreasing and income effect is stronger than substitution effect?arrow_forwardWhich of the following statements correctly describe discouraged workers? (If none of the choices apply, leave all of the checkboxes blank.) Check all that apply. A. They are full-time workers who would like to work only part-time. B. They are counted as part of the labor force by the Bureau of Labor Statistics. C. They have not looked for a job in 4 weeks (or longer), but they would like a job and are available for work. D. They are dissatisfied with their current jobs and are considering quitting. The following table contains U.S. employment information from August 2018. Civilian Population Employed Unemployed Discouraged (Persons 16 years old and over) (Persons) (Persons) (Persons) 258,066,000 155,604,000 6,197,000 434,000 The Bureau of Labor Statistics has several measures of joblessness in addition to the official unemployment rate. One alternative is the U-4 measure of labor underutilization, which is calculated as…arrow_forwardAccording to the BLS, wage rates in Mexico are only about 10% of those in the US. What factors would determine whether your firm should shut down its plants in the US and relocate to Mexico, or continue to produce in the US?arrow_forward
- Which of the following statements correctly describe discouraged workers? (If none of the choices apply, leave all of the checkboxes blank.) Check all that apply. They are employed workers who want to earn higher wages. They have not looked for a job in 6 weeks, but they would like a job and are available for work. They have given up on looking for a job. They are counted as part of the labor force by the Bureau of Labor Statistics.arrow_forwardFor each of the following separate scenarios, determine if the labor force participation rate will increase or decrease. Group of answer choices ( Choose) Labor force participation rate will decrease or Labor force participation rate will Increase A) More companies allow workers to work from home. B) The government increases the financial aid received by full-time students. C) Companies receive government subsidies for hiring high-school graduates. D) Some discouraged workers re-enter the labor force to look for work.arrow_forwardA worker receives, when unemployed, an offer to work forever at wage w, where w is drawn from the distribution F(w). Wage offers are identically and independently distributed over time. The worker maximizes Where ct is consumption and lt is leisure. Assume Rt is i.i.d. with distribution H(R). The budget constraint is given by And lt + nt ≤ 1 if the worker has a job that pays wt. If the worker is unemployed, the budget constraint is at+1 ≤ Rt(at + z − ct) and lt = 1. Here z is unemployment compensation. It is assumed that u(·) is bounded and that at , the worker’s asset position, cannot be negative. This assumption corresponds to a no-borrowing assumption. Write the Bellman equation for this problem.arrow_forward
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