Refer to Scenario 1

question 80

Multiple Choice

Refer to Scenario 1.1 below to answer the questions that follow.
SCENARIO 1.1: An economist wants to understand the relationship between minimum wages and the level of teenage unemployment. The economist collects data on the values of the minimum wage and the levels of teenage unemployment over time. The economist concludes that a 1% increase in minimum wage causes a 0.2% increase in teenage unemployment. From this information he concludes that the minimum wage is harmful to teenagers and should be reduced or eliminated to increase employment among teenagers.
-Refer to Scenario 1.1. The statement, "the minimum wage is harmful to teenagers and should be reduced or eliminated to increase employment among teenagers," is an example of

Definitions:

Internal Rate

Refers to the calculation used to estimate the profitability of potential investments, specifically the internal rate of return (IRR) on a project.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used for analyzing the profitability of investments or projects.

Discount Rate

The interest rate used in discounted cash flow (DCF) analyses to determine the present value of future cash flows.

Simple Rate

An interest calculation method where the interest charge is calculated only on the principal amount, without compounding.