2. What are the effects of minimum wage on labor market (both labor demand and labor supply)?
3. Explain the relationship between inflation and unemployment through the Phillips Curve.
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Expert's answer
2022-04-20T13:38:26-0400
There are four main types of unemployment in an economy—frictional, structural, cyclical, and seasonal—and each has a different cause.
If the minimum wage rate increases, employers will want to hire fewer employees. The quantity of labor demanded will decrease, and there will be a movement upward along the demand curve. If the wages and salaries decrease, employers are more likely to hire a greater number of workers.
The Phillips curve shows the relationship between inflation and unemployment. In the short-run, inflation and unemployment are inversely related; as one quantity increases, the other decreases. In the long-run, there is no trade-off. In the 1960's, economists believed that the short-run Phillips curve was stable.
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