Chapter 4: Labor and Financial Markets

In the graph, place the usury line at a location that indicates a binding usury law. __________ are laws that set a price maximum in the financial capital markets. When is it a binding ceiling? __________ are laws that set a wage minimum in the labor market. When is it a nonbinding floor?

Usury laws the equilibrium interest rate is higher than the law permits Minimum wage laws the equilibrium wage rate is above the minimum wage rate

Various forms of capital are used in the production of final goods and services. However, the term financial capital market refers to

a market where households with savings and firms which demand funds for investment interact.

Assume that the table represents the financial capital market of Latvia. Compute the market shortage if the interest rate is set equal to 11.5%11.5% .

$40 billion

Suppose the accompanying graph depicts the labor market for bullet train conductors. Initially, the market was in equilibrium at the intersection of the demand curve and the initial supply curve, S1. Then, suppose that more people have chosen to train as bullet train conductors which causes the supply curve to shift right to a new location , S2. Suppose that, simultaneously, you observe an increase in the wages of bullet train conductors. On the graph, demonstrate how the labor demand curve must have changed so that conductors' wages increased. If, in general, all high-skilled industries have also performed in a similar way, of the following predictions, which is the most likely to occur?

An increase in income inequality.

In the graph, place the usury line at a location that indicates a binding usury law.

End 1: (0,10) End 2: (18.10)

The graph of a labor market is shown. Place the endpoints of the minimum wage line to indicate a binding minimum wage in this market.

End 1: (0,7) End 2: (9,7)

The graphs show the market labor supply (LS) curve for the country of Littleland. The two graphs show different shifts in the LS curve, from LS1 to LS2. Most of the items cause a shift in the labor supply (LS) curve. Place the statements under the graph that represents the appropriate shift.

Graph A The government introduces a free childcare policy. an increase in immigration to Littleland an increase in the birthrate Graph B an increase in emigration from Littleland a decrease in the birthrate

College students often borrow money to attend school. Generally, the plan is to pay loans back through future earnings. In this way, capital and labor markets are intimately connected. Assume that the market for education and college educated labor are perfectly competitive. Use the accompanying graphs to show what happens to the market for education and college educated labor if the government increases the number of very low interest loans. Who gains and who loses from this policy?

Market for College Education Supply: no shift Demand: shift right Marker for College Educated Labor Supply: shift right Demand: no shift

Which is true of the minimum wage in the United States? Which has been shown to be true in the United States about changes in the minimum wage rate?

Only about 1% of the United States population receives the minimum wage rate. Changes in the minimum wage have historically had a small impact on employment.

Which of the following is not a reason why negative consequences can result from efforts to control prices?

Prices reflect the amount of profit that producers want to gain for providing goods, services, labor, or financial capital to the market.

The graph depicts two possible changes in the financial capital scenarios for country X. Note that point 0 is the initial condition, scenario A is represented by point A, and scenario B is represented by point B. In either scenario, either only supply or demand changes, whereas other factors remain stationary. Match each scenario with the possible cause or causes.

Scenario A The enthusiasm for foreign investors diminished for investing their money in this economy. Scenario B Consumers are less confident they will repay loans in the future. Not shown in graph A new usury law was passed. Country X companies are certain that their investments will result in higher profits in the future.

In the graph of the labor market for high‑skill workers, move the appropriate curve or curves to reflect a change in technology that increases worker productivity and is a complement to labor. Then, complete the statement about the results of this change. __________ will __________ their __________ labor, and the wage will __________.

Supply: no shift Demand: shift right Firms; increase; demand for

The labor market for engineers specializing in microchip technology is graphed below. Adjust the graph to depict what happens if the demand for microchips increases. What if, at the same time, the union for microchip engineers implements a policy forcing companies to only hire engineers with a doctorate degree?

Supply: shift left Demand: shift right

A county's labor market is depicted in the graph below. The government believes that college students are not receiving enough real world experience before graduating. The government decides to pay for the final two years of college for any student who works at least part-time while attending college. Change the graph below to demonstrate the government subsidy's impact on the labor market.

Supply: shift right Demand: no change

The graph represents a labor market. a. What is the equilibrium hourly wage? b. What is the equilibrium number of hours worked? c. Identify all the factors that would cause the equilibrium wage to increase. It would increase with:

a. $5 per hour b. 12 hours c. an increase in labor demand a decrease in labor supplied

Suppose the demand and supply schedules shown in the table represent the labor market for carpenters. a. What is the equilibrium number of carpenters who will be hired? b. What is the equilibrium hourly wage for carpenters?

a. 7000 b. $14

Suppose the graph represents the labor market for low-wage workers. A minimum wage of $8$8 per hour is being considered. If imposed, the minimum wage will result in a __________ of __________

surplus; 200 workers

In the market for financial capital,

the supply of financial capital comes from savings, and the demand goes to making loans.

Place the answer options in the associated axes of the graph so that it reflects the major components of the financial capital market. There is more than one correct answer for each axis, but not all of the answer options will be used.

x axis interest rates rate of return y axis quantity of money borrowed quantity of money invested