Figure 9-1 This Figure Shows the Effect of a Minimum-Wage Law

question 176

Multiple Choice

Figure 9-1
This figure shows the effect of a minimum-wage law.
-Refer to the Figure 9-1.If there was no minimum wage and then the government instituted a minimum wage of $6,what would happen to employment in this market?

• A) Employment would rise by 10.
• B) Employment would fall by 20.
• C) Unemployment would increase by 10.
• D) Unemployment would increase by 20.

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Definitions:

Aggregate Demand-Aggregate Supply Model

A macroeconomic model that explains price levels and the output levels of an economy through the relationship between aggregate demand and aggregate supply.

Long Run Equilibrium

An economic condition where all factors of production and costs are variable and the market is fully adjusted to any changes.

Short Run Equilibrium

A situation in economics where demand and supply are balanced at current prices within a short timeframe.

Contractionary Gap

A situation where the real GDP is lower than the potential GDP at full employment, indicating underutilized economic resources.