Substantial increase in the factor cost of production

Assignment Help Business Economics

Reference no: EM13840456

Suppose an economy that is initially at full employment faces a substantial increase in the factor cost of production.

a. Discuss (with the aid of aggregate output market and money market diagrams) the short-run effect on output, unemployment, general price level and interest rate with a substantial increase in the factor cost of production.

b. Discuss (with the aid of an aggregate output market diagram) what kind of monetary policy can be adopted to restore the economy back to full employment equilibrium.

c. Suppose the problem you discussed in part (a) relies on the self adjustment mechanism instead of the discretionary policy proposed in part (b). Examine the possible impact of minimum wage on the self-adjustment mechanism.

Reference no: EM13840456

Questions Cloud

Competitors from using the term roller board for products : Wildboards Company introduces a product called a "Rollerboard" for which it is granted a registered trademark. The Rollerboard is a snowboard with a removable row of wheels along the center of the underside. Wildboards cannot stop competitors from us..

Write a report on a new method of presenting oral : Pecha Kucha essay. The purpose of the essay is to write a report on a new method of presenting oral presentations "Pecha Kucha". Describe the concept, uses, benefits, drawbacks, which types of presentations would be most useful and anything else you ..

What are the benefits and challenges of an raroc system : Write a three to four page research paper in which you describe an RAROC system for risk management and identify benefits and challenges of an RAROC system. What are the benefits and challenges of an RAROC system

Business and cultural background : Assignment: Imagine you work for a company that does business internationally, so many employees travel all over the world. It is your job to develop a fact sheet for the country you selected that will give the traveler a basic understanding of its e..

Substantial increase in the factor cost of production : Suppose an economy that is initially at full employment faces a substantial increase in the factor cost of production. Discuss (with the aid of aggregate output market and money market diagrams) the short-run effect on output, unemployment, general p..

What happens to the price and quantity of cell phones : As wages increase for Apple Workers, what happens to the price and quantity of iphones? As the price of drone phones decrease, what happens to the price and quantity of iphones? If the government taxes cell phones, what happens to the price and quant..

Optimistic bias is the tendency to overestimate : Optimistic bias is the tendency to overestimate the chances that something good will happen to you and underestimate the chances that something bad will happen to you. Some researchers propose that positive illusions, another term for optimistic bias..

Why is risk capital important to bank of america : Why is risk capital important to Bank of America? What is the relationship between risk capital and Bank of America's ability to remain solvent? What steps does Bank of America take to remain solvent? What additional steps, if any, should Bank of A..

What ways do principles of economics relate to decision : Metro Airlines runs 10 flights per day at a total cost of $50,000, which includes $30,000 in fixed costs for airport fees, airplanes, and the reservation system and $20,000 invariable costs for flight crews, fuel, baggage handlers, and food service

User Account

All Pages