American adults of working age work on average 35-40% more hours per week than their counterparts in France and Germany. All of the following have been mentioned by researchers as possible explanations, except: a. Higher payroll and income taxes applied to both workers and firms. b. A greater inherent laziness among the French and the Germans. c. Extensive regulations regarding working and employment practices. d. Social interactions between workers during time allocated to leisure.
Added by Steven K.
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The correct answer is b. A greater inherent laziness among the French and the Germans has not been mentioned by researchers as a possible explanation for the difference in working hours. Show more…
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Aarya B.
In many European countries high minimum wages have led to high levels of unemployment and underemployment, and a two-tier labor system. In the formal labor market, workers have good jobs that pay at least the minimum wage. In the informal, or black market for labor, workers have poor jobs and receive less than the minimum wage. a. Draw a demand and supply diagram showing the effect of the imposition of a minimum wage on the overall market for labor, with wage on the vertical axis and hours of labor on the horizontal axis. Your supply curve should represent the hours of labor offered by workers according to the wage, and the demand curve represents the hours of labor demanded by employers according to the wage. On your diagram show the deadweight loss from the imposition of a minimum wage. What type of shortage is created? Illustrate on your diagram the size of the shortage. b. Assume that the imposition of the high minimum wage causes a contraction in the economy so that employers in the formal sector cut their production and their demand for workers. Illustrate the effect of this on the overall market for labor. What happens to the size of the deadweight loss? The shortage? Illustrate with a diagram. c. Assume that the workers who cannot get a job paying at least the minimum wage move into the informal labor market where there is no minimum wage. What happens to the size of the informal market for labor as a result of the economic contraction? What happens to the equilibrium wage in the informal labor market? Illustrate with a supply and demand diagram for the informal market. Solution a. The shortage created is a shortage of jobs: at the minimum wage there are more job-seekers than there are jobs available. b. The contraction in the economy causes the demand for labor to fall, shifting the demand curve leftwards from $\mathrm{D}$ to its new position at $\mathrm{D}^{\prime}$. Both the deadweight loss and the shortage of jobs caused by the minimum wage increase as a result of the fall in the demand for labor. c. As a result of the economic contraction which reduces the demand for workers in the overall market, workers move to the informal labor market. This increases the supply of labor in the informal labor market. The supply curve for labor shifts rightwards from $S$ to its new position at $S^{\prime}$. The equilibrium wage in the informal labor market falls from $w^{*}$ to $w^{* *}$ and the quantity of hours transacted increases from $Q^{*}$ to $Q^{* *}$, as the informal labor market expands.Solution a. The shortage created is a shortage of jobs: at the minimum wage there are more job-seekers than there are jobs available. b. The contraction in the economy causes the demand for labor to fall, shifting the demand curve leftwards from $\mathrm{D}$ to its new position at $\mathrm{D}$ '. Both the deadweight loss and the shortage of jobs caused by the minimum wage increase as a result of the fall in the demand for labor. c. As a result of the economic contraction which reduces the demand for workers in the overall market, workers move to the informal labor market. This increases the supply of labor in the informal labor market. The supply curve for labor shifts rightwards from $S$ to its new position at $S^{\prime}$. The equilibrium wage in the informal labor market falls from $w^{*}$ to $w^{* *}$ and the quantity of hours transacted increases from $Q^{*}$ to $Q^{* *}$, as the informal labor market expands.
A country is operating below full employment. a. Illustrate this economy on a fully-labeled aggregate demand--aggregate supply model. Include aggregate demand, short-run aggregate supply, and long-run aggregate supply. i. Label the short-run equilibrium price PE and the short-run equilibrium output YE. ii. Label the full-employment level of output YF. b. If the government and central bank do not intervene, how would this economy adjust in the long run? Explain. c. Illustrate the process of part (b) on your graph from part (a). d. The government decides to use fiscal policy to correct the economic situation in part (a). Assume the difference between the short-run and long-run equilibrium output is worth $80 billion, and the marginal propensity to consume is 0.9. Calculate one specific and effective fiscal policy action the government could take. e. What would be the short-run impact of the government's action on the aggregate price level? f. What would be the short-run impact of the government's action on the potential output of the economy? g. Will the long-run equilibrium price level if the government intervenes be less than, equal to, or greater than the long-run equilibrium price level without intervention? h. Show the impact of the government intervention from part (d) on the equilibrium real interest rate on a fully labeled loanable funds market graph. i. Will the long-run aggregate supply curve move as a result of the change from part (h)? Explain.
Adi S.
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