Answer to Question #272365 in Macroeconomics for Saman Khalil

Question

Consider the effects of a government employment subsidy whereby the

government paid 10 percent of the wages of newly hired workers. How would

employment and output be affected by the program in the classical model? What

would be the effect on the position of the aggregate supply schedule.

Answer 1

Such programs increase the output as it influences more spendings. The more spendings create more income hence donating more employment opportunities to the economy.