unit 9

Question 1

nominal wage

Answer 1

actual amount received in payment for work

Question 2

real wage=

Answer 2

nominal wage/ prie level of standard bundle of goods

Question 3

markup=

Answer 3

1-W/P

Question 4

wage-setting curve

Answer 4

this gives the real wage necessary at each level of economy-wide employment to provide workers with incentives to work hard and well

Question 5

price-setting curve

Answer 5

this gives the real wage paid when firms choose their profit-maximising price

Question 6

unemployed

Answer 6

those who have been out of work but are willing and able to work and have been actively seeking work in the last 4 weeks

Question 7

participation rate

Answer 7

labour force/population of working age

Question 8

unemployment rate

Answer 8

unemployed/ labour force

Question 9

employment rate

Answer 9

employed/population of working age

Question 10

seasonally adjusted unemployment rate

Answer 10

take out the effect of reoccurring variation throughout the year

Question 11

what is price per unit of output split into

Answer 11

profit per unit and wage per unit

Question 12

what is output per worker split into

Answer 12

real wage(W/P) and real profit per worker(profit/P)

Question 13

unit labour cost

Answer 13

nominal wage/labour productivity

Question 14

labour market equilibrium

Answer 14

the combination of the real wage and the level of employment determined by the intersection of the wage-setting and the price-setting curves. This is the Nash equilibrium of the labour market because neither employers nor workers could do better by changing their behaviour.

Question 15

equilibrium unemployment

Answer 15

The number of people seeking work but without jobs, which is determined by the intersection of the wage-setting and price-setting curves. This is the Nash equilibrium of the labour market where neither employers nor workers could do better by changing their behaviour.

Question 16

cyclical/demand deficient U

Answer 16

The increase in unemployment above equilibrium unemployment caused by a fall in aggregate demand associated with the business cycle.

Question 17

derived demand for labour

Answer 17

a firm’s demand for labour depends on the demand for their goods and services

Question 18

involuntary U

Answer 18

The state of being out of work, but pre­ferring to have a job at the wages and working conditions that other­wise identical employed workers have.

Question 19

AD

Answer 19

sum of the demand for all goods and services produced in the economy

Question 20

monetary policy

Answer 20

Central bank (or government) actions aimed at influencing economic activity through changing interest rates or the prices of financial assets.

Question 21

fiscal policy

Answer 21

Changes in taxes or government spending in order to stabilize the economy.

Question 22

trade union

Answer 22

An organization consisting predominantly of employees, the principal activities of which include the negotiation of rates of pay and conditions of employment for its members.

Question 23

what does an increase in labour supply do to w.s curve?

Answer 23

it shifts it downward

Question 24

what is the markup determined by?

Answer 24

the markup chosen by the firm when it sets its price to maximise profits is determined by the amount of competition the firm faces

Question 25

what does the markup determine?

Answer 25

the markup determines the distribution of the firm’s revenue between the employees and the owners

Question 26

policies that shift price-setting curve

Answer 26

1- ed and training: markup remains unchanged as determined by competition so when output per worker rises from increased quality of ed and training, real wages and p.s curve rise so both equil employment and real wages increase

2- wage subsidy- reduces firm’s costs of labour. as before the optimal markup that firms uses to determine price has not changed, so firm will lower price to restore old markup. when all firms do this, the p of goods fall and real wages increase. shifts p.s. curve upwards
In both cases—education and training or a wage subsidy—the effect is to move the new labour market equilibrium up and right along with wage-setting curve to both higher wages and greater employment in the economy as a whole.

Question 27

effects of policies on wage-setting curve

Answer 27

1- U benefit: a higher U benefit increases the reservation wage and shifts best response curve to the right. employer sets high wage and new w.s. curve goes through this point and U remains unchanged->. higher w.s.s curve
2- increasing pool of labour e.g. from policies to increase immigration, or to enhance women’s employment opportunities through subsidized childcare. these shift down w.s curve