Reference no: EM132312945
1. In the essay, "Economic Possibilities for Our Grandchildren," written in 1930, John Maynard
Keynes predicted that, as a result of economic growth, we would "in a hundred years ... [be] eight times better off in the economic sense than we are today." In 2015, U.S. real GDP per capita was 6.4 times larger than in 1930, and with 15 years to 2030, it looks as though he made a very good prediction. The second part of his prediction has proved less accurate. Keynes envisioned that we would be so rich by 2030 that it would only be necessary to work "three-hour shifts or a fifteen-hour week," yet the average American still works about 35 hours a week. Using the labor demand and labor supply model, and substitution and income effects, explain what Keynes assumed about the relative importance of substitution and income effects that caused this prediction about very short work weeks to be inaccurate.
2. Using the perfectly competitive labor demand and labor supply model, what would happen, all else being equal, to the real wage and the number of workers in each of the cases below?
A. There is an increase in the amount of physical capital as a result of positive net investment in the economy.
B. In a particular occupation, workplace safety regulations are effective in lowering the rate of workplace accidents and injuries.
C. In a particular occupation, the good that workers are producing is no longer as popular as it once was, leading to a decrease in the price of the good that workers help produce.
D. Social Security retirement benefits are cut and the retirement age is increased.
3. Discuss the potential reasons for the long-run decrease in labor force participation rates for older males.
4. During the twentieth century, female labor force participation increased dramatically, particularly for married women. In explaining why labor force participation rates increased, distinguish between labor demand and labor supply factors.
5. In 1955, 1 in 3 workers were represented by a labor union, while by 2015 only 1 in 9 were represented. What factors explain the decrease in unionization rates in the United States during this time?
6. What is a "yellow-dog" contract and how and when did this affect the formation of unions?