Question

ECON50 25. Sectoral shifts in demand for output increase unemployment due to job search. From time to time the demand for workers has risen in one region of the United States and fallen in another. This illustrates a frictional unemployment created by efficiency wipes. b. structural unemployment created by efficiency wages. c. frictional unemployment created by sectoral shifts d structural unemployment created by sectoral shifts Hint: One company closes out in one location while other companies open up in other regions that will create frictional unemployment because skills of workers and job descriptions are not likely match quickly. For example, unemployment workers from the closed-out typewriter company do not have skill sets demanded by computer industry Figure #1: 20 30 40 26. Refer to Figure 1. Without any of imposition of a minimum wage law by government, the equilibrium wage and employment in this market is and 60 workers b. 55 and 30 workers c. $5 and 500 workers d. S8 and 200 workers Hint: This question wants you to determine the equilibrium of the labor market. As emphasized in lecture notes, the equilibrium real wage (W/P)* exists whereat labor supply equals labor demand (such as Q= Q'). Your task is to interpret the intersection point of the two lines: labor supply and labor demand. 27. Refer to Figure 1. If the government instituted a minimum wage of S6, in this market, unemployment would a increase by 20. b. fall by 20. c. increase by 40. d. full by 40. Hint: At minimum real wage (W/P) $6, the horizontal line at this real wage hits labor demand curve at Qº 20, and it also hits the labor supply at Q 40. This question wants you to determine what the market labor experiences with shortage or surplus employment at this minimum wage as follows: 0-00 >0 Surpluus = increase unemployment O-O O Shortage decrease unemployment 05-0=0 at Equilibrium No change unemployment 28. Financial intermediaries are financial institutions throuph which savers can indirectly provide funds to borrowers. Which of the following is NOT a financial intermediary? a. banks. b. a US government bond selling directly to public a mutual fund d all of the above is correct. Hint: This question asks you to identify which answer key that does not fit financial intermediaries. The financial intermediaries include both banks and mutual funds. 29. Bond is a certificate of indebtedness that specifies the obligations of the barrower to the holder. Skyline Chili wants to finance the purchase of new equipment for its restaurants, but they have limited internal funds. Skyline will likely a demand loanable funds by huying bonds. b. demand loanable funds by selling bonds c. supply loanable funds by buying honds. d. supply loanable funds by selling bonds. Hint: Investment is part of the demand for loanable funds. If Skyline Chili intends to finance its new investment through debt service, instead of allowing public investors to be part of ownership of Skyline Chili, then, it must sell bond to public investors. RMUNNICHA

Answer 1

25. C
(Unemployment is created by sectoral shifts and such an unemployment is frictional in nature.)

26. B
(At S = D, W/P = 5 and Q = 30.)

27. A
(At $6, Qs = 40 and Qd = 20. So, unemployment = Qs - Qd = 40 -20 = 20)

28. C
(Mutual funds are not financial intermediaries.)

29. B
(To invest or borrow it will demand loanable funds by selling bonds.)