Answer to Question #268619 in Macroeconomics for Shelle

Question

(c) Suppose that 20,000 of the employed switches to jobs in the underground

economy. When interviewed by STATIN, 50% of these switchers report that they

are not working and not seeking work, while the other 50% report that they are

not working but seeking work. Explain what happens to the official

unemployment rate and the “true” unemployment rate. (2 marks)

(d) Illustrate and carefully explain the impact of an increase in the income tax rate

from 25 percent to 35 percent on the demand for labour, supply of labour,

equilibrium wage and level of employment. (6 marks)

(f) With the aid of a well labelled diagram, carefully explain the impact on the

money market if there was a discovery of gold that fuels inflation. (5 marks

Answer 1

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