Question

Macroeconomic

Answer 1

Answer: 4

the equilibrium wage rate = $40 per hour in 2018

the quantity of labor employed in 2018 is = 25 labor per hour  

The equilibrium wage rate is the rate where labor demanded is equal to labor supplied and in the given table we can see that the labor (hours) demanded is equal to labor hours supplied at real wage rate of $40 per hour where both demand and supply of labor hours is 25.

The quantity of labor employed will also at the point where labor supplied will be equal to labor demanded. So the quantity of labor employed is 25 labor hours in 2018.

We can calculate it through the graph also.

The equilibrium wage rate is at the point where labor hours supplied is equal to the labor hours demanded and it will also decide the quantity of labor employed. As shown in the below graph the labor hours demanded curve is intersecting the labor supplied curve at point E where the equilibrium wage rate is ($per hour) $40 and the quantity of labor employed is 25 labor (hours)

The labor productivity = real GDP / labor (hours)

The real GDP in 2018 will be = $2,000. As the economy is in equilibrium at 40 labor (hours) and from the given second table we got that the real GDP is $2,000 at 40 labor (hours) in 2018

Labor productivity = $2,000 / 40 = $50

The labor productivity is $50 per labor hour

The potential GDP is $2000 in the 2018

The potential GDP is the real GDP in the economy when the economy is in the state of full employment means where the quantity of labor demanded and supplied are equal. As shown in the above graph economy is in equilibrium at 40 labor per hour and this is the full employment labor in 2018 and the real GDP at this labor hour is $2,000 which is the potential GDP of the economy.

Answer: 6

In 2019, if the population increases and the labor supplied increase by 10 at each real wage rate the new labor hours supplied will be:

Real wage rate ($ per hour)	Labor hours supplied	Labor hour demanded
80	55	5
70	50	10
60	45	15
50	40	20
40	35	25
30	30	30
20	25	35

  

Now the equilibrium wage rate is $30 per hour as the labour hour demanded is equal to the labor hour supplied at 30 labor

The wage rate per hour has decreased to $30 in 2019 from $40 in 2018 while the employment rate has increased as the labor demand has increased from 25 labor to 30 labor (hours) but the potential and real GDP in the economy has decreased.

So, the standard of living in this economy will decrease in 2019 because the wage rate and the GDP has decreased.