Answer to Question #208612 in Macroeconomics for BENSON

Question

a) Discuss whether minimum wage laws are good or bad for the economy.

b) What would compel a firm to pay above equilibrium wages?

c) Discuss the major types of unemployment?

d) Discuss the policies that can be implemented to cure unemployment (Hint: Demand side policies and Supply side policies).

e) Suppose that UNZA is a country with a population of 321,166,640 people of which the number of unemployed people is 121,166,640. The employment rate in this economy is 0.104, and the labour force participation rate 72.5%.

i. What is the size of the labour force?

ii. How many people are unemployed and employed?

iii. What is the size of the working-age population?

iv. If the total output produced domestically in this country is 625,234,567, what is the GDP per-capita?

Answer 1

a) Minimum wage laws are good for the economy because they increase employment and efficiency.

b)A firm will be forced to pay higher wages when when supply of labor is limited.

c)Seasonal unemployment is caused by less demand for labor, cyclical unemployment is as a result of downturn in business cycle and frictional unemployment occurs when one leaves a job to look for a better one.

d)The policies include cutting interest and tax rates to boost aggregate demand and increasing funding in programmes aimed at improving human capital for jobless.

e)(i) labor force =unemployed÷unemployment rate

$121,166,640÷0.104×100\\=116,505,384,600$

(ii) unemployed people =121,166,640

(iii) working age =employed÷ labor force participation rate

$11,638,521,800÷0.0725\\=160,531,335,200$

(I)GDP per Capita =output per person÷country population

$625234567÷321166640\\=1.94676$