1.Which one of these is an effect that raising minimum wage is likely to create?
ID: 1120191 • Letter: 1
Question
1.Which one of these is an effect that raising minimum wage is likely to create?
Select one:
a. Employment in the economy will increase as more workers join the labor force
b. Firms will make more profit as workers increase their productivity in response to higher wages
c. The Short-run Aggregate Supply will increase as people invest more in human capital
d. Unemployment will rise as some businesses will reduce their workforce
e. A higher minimum wage will raise interest rates, which will stimulate savings and investment
2.Suppose that Transitia, a transition economy, grows at 8% each year and Developam, a highly developed economy, grows at 4% a year. If Transitia has a GDP of $5 billion and Developam has a GDP of $40 billion, how long would it take before Transitia has the same GDP as Developam?
Select one:
a. Never
b. 18 years
c. 36 years
d. 54 years
e. 72 year
Explanation / Answer
1. Option (c) is the correct answer as the wage increase will result in the improved productivity at the short run and all the remaining options are not likely as compared to option (c).
2. Transitia growth rate is double that of Developam. Option (d) is the right answer. It takes 54 years to have same GDP as Developam.
(1.08^54)*5 = (1.04^54)*40
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