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1 QUESTION Describe in words in (painful) detail, how the following changes would affect the real wage and employment of unskilled workers on an automobile assembly line
1 QUESTION
Describe in words in (painful) detail, how the following changes would affect the real wage and employment of unskilled workers on an automobile assembly line. For full credit, give the precise motivations of the shift in demand or supply.
a. increased popularity of the car produced by the plant
b. A sharp increase in the price of gas causes many consumers to switch to public transportation.
2 QUESTION
2. Candice owns a golden ring valued at $1000, cash of $500 and a checking account of $1000. She also has credit card debt of $300, an electric bill of $200. Draw her balance sheet and calculate her initial new worth. For the following transactions show the changes on her balance sheet and state the change in her net worth. Note any transaction which includes savings.
a. Candice buys a camera worth $500 using her credit cardd
b. Candice writes a check to pay off her entire credit card balances (ignoring transactions in part a)
c. Candice discovers a notch in her ring which cuts its value by $100 (ignoring transactions in parts a and b)
3 Question
a. Find the amount of deposits and the money supply if bank reserves are 200 and the public holds 100 in currency. Banks face a required reserve ratio of 0.20
b. Find currency held by the public and bank reserves if the required reserve ratio if 0.25 and the money supply is 1000 with currency held by the public equals bank reserves.
Expert Solution
1. a) Increased popularity of the car produced by the plant will increase the supply of cars by te producers which further increase the demand for labour in the labour market who produce cars and thus shift the demand curve for labour to the right. The final result will be increase in the equilibrium unskilled labour (more employment) in the economy and rise in the real wage rate.
b) A sharp increase in the price of gas causes many consumers to switch to public transportation which reduces the demand for cars in the market by the consumers and hence, in the labour market, the demand for unskilled labour who produce cars will fall. The demand curve for labour will shift to the left resulting in fall in the employment of unskilled labour in the labour market. The real wage rate will also fall with lower demand for labours.
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