The Combined Impact of the Labor Pool Effect of Globalization

question 3

Multiple Choice

The combined impact of the labor pool effect of globalization for low-skilled workers and the market expansion effect of globalization for high-skilled workers is

• A) falling income inequality, since one effect helps those with low incomes and the other effect hurts those with high incomes.
• B) stable income inequality, since one effect helps those with low incomes and the other effect helps those with high incomes.
• C) rising income inequality, since one effect helps those with high incomes and the other effect hurts those with low incomes.
• D) stable income inequality, since one effect hurts those with low incomes and the other effect hurts those with high incomes.

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Definitions:

Input Demand

The demand for resources (inputs) that are used in the production of goods and services.

Productivity

The measure of how efficiently inputs, such as labor and capital, are converted into outputs, such as goods and services.

Market Wage

The prevailing wage rate in the labor market for a given type of work, determined by supply and demand for labor.

Labor Supply

The total hours that workers are willing and able to work at a given wage rate, within a specific economy or market.