Answer to Question #95463 in Macroeconomics for Maryum

Question

Consider the effect of a government subsidy whereby 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 position of Aggregate supply schedule.

Answer 1

The employment and output would increase as a result of the program in the classical model. The aggregate supply would increase and its curve would shift to the right.