-Refer to Exhibit 4-6

question 113

Multiple Choice

-Refer to Exhibit 4-6.Suppose the minimum wage is set at $5.The result will be

• A) unemployment.
• B) a shortage of unskilled labor.
• C) no impact on the unskilled labor market.
• D) a prolonged surplus of unskilled labor.
• E) none of the above

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Definitions:

Economy's Natural Ability

The inherent capacity of an economy to grow and adapt over time, based on resources, technology, and human capital.

Active Economic Policy

Government interventions aimed at influencing the economy through measures such as fiscal and monetary policies to achieve specific macroeconomic objectives.

Law of Diminishing Returns

An economic principle stating that adding an additional factor of production results in smaller increases in output after a certain point.

Rational Expectations

A school of thought that argues people form expectations based on all available information, including the likely future actions of government policymakers.