Refer to Scenario 1

question 157

Multiple Choice

Refer to Scenario 1.1 below to answer the question(s) 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 collection and use of the data on minimum wage and teenage unemployment over time is an example of

• A) law and economics.
• B) economic history.
• C) econometrics.
• D) empirical economics.

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Definitions:

Loanable Funds Curve

A graphical representation that shows the relationship between the interest rate and the quantity of loanable funds supplied and demanded.

Interest Rate

The cost incurred by a borrower, calculated as a percentage of the principal, for borrowing assets from a lender.

Loanable Funds

The money available in the financial system for lending to individuals and businesses, depending on the savings rate and monetary policies.

Equilibrium Interest Rate

The interest rate at which the quantity of money demanded equals the quantity of money supplied, balancing the savings and the demands for loans.