Suppose the Minimum Wage Decreases

question 65

Multiple Choice

Suppose the minimum wage decreases. Given this event, we would expect which of the following to occur?

• A) A decrease in the interest rate in the medium run.
• B) No change in the real wage in the medium run.
• C) A decrease in the aggregate price level and an increase in output in the short run.
• D) A decrease in the natural rate of unemployment.
• E) All of the above.

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Definitions:

Correlation Coefficient

A statistical measure that calculates the strength and direction of the relationship between two variables, ranging from -1 to 1.

Standard Deviation

A statistical measure that quantifies the variation or dispersion of a set of data points, often used to assess the volatility of an investment.

Separation Property

The property that portfolio choice can be separated into two independent tasks: (1) determination of the optimal risky portfolio, which is a purely technical problem, and (2) the personal choice of the best mix of the risky portfolio and the risk-free asset.

Risky Portfolio

An investment portfolio that contains assets with a higher degree of risk, potentially leading to higher returns or greater losses.