Question

The figure on the right depicts the labor market in equilibrium The Labor Market with employment at 50 million jobs. (Enter your response as an integer) Labor su curve Suppose traditional monetary and fiscal policy has had only limited success in promoting higher employment. Governments sometimes seek to directly stimlaehing the private sector by engineering a shift in the labor curve demand or supply In the market on the right, suppose the government seeks to directly stimulate the employment of an additional 10 million workers 1.) Using the line drawing tool, shift the demand curve such that this employment target is achieved Labor demand curve Carefully follow the instructions above and only draw the required object 10 20 30 40 50 60 70 80 90 100 Quantity of labor (millions) According to your graph, the targeted increase in employment can be achieved with the payment of a subsidy to employers of $per worker. (Enter your response as an integer. Hint:the answer is the vertical distance between the old and the new demanc curve.)

Answer 1

In the figure, the equilibrium quantity of labor is determined at the point where the demand for labor is exactly equal to the supply for labor. Thus, in the labor market the equilibrium with employment is achieved at 50 million jobs. With the assumption that only the traditional monetary and fiscal policy has limited success in promoting higher employment in the economy. If the government seeks to stimulate hiring by the private sector by engineering a shift in the labor demand curve. The increase in the labor demand curve will help in creating employment opportunity in the economy. According to the question. The government is aiming at increasing the employment of an additional 10 million workers in the economy. The rightward shift in the demand curve is shown as follows: The Labor Market D' Wage Labor supply curve Labor demand curve 10 20 30 40 50 60 70 80 90 100 Quantity of labor (millions) According to the graph, the targeted increase in employment can be achieved with the payment of a subsidy to employers of $1 per worker. The subsidy is calculated by taking the difference between the old equilibrium (E) and new equilibrium (E).