Question

1. Sports Unlimited', a retail business, decides to employ a large number of unskilled immigrants to work in its warehouses. Illustrate and explain the likely effect of this policy on: (a) wages and employment of existing unskilled workers (b) incomes of owners and managem ent (c) longer term wages, salaries and profits 2. What is meant by the interest parity condition' between the UK pound sterling and the euro? Assume the rate of UK inflation is expected to rise faster than the rate of inflation of the euro area. Illustrate and explain this effect on the expected returns curve of the euro, and the euro/UK pound exchange rate, Bank 3. According to economic theory, is there any role for govemment in promoting economic growth (a) in developing countries (b) where markets are developed and exhibit flexible prices? 4. Explain the relative importance of poverty, fragmented communities and cultural identity to the incidence of terrorism 5. What is meant by 'supply-side economics' and cxitically discuss its relevance and importance in policy making. 6. According to the theory of comparative advantage, illustrate and explain how the terms of intemational trade evolve between a rich nation and a less developed neighbouring country and its effect on the domestic allocation of resources within each. 7. Critically discuss the extemal costs and benefits experienced by clusters or centres of economic concentration

Answer 1

Note : Kindly post one question at a time.

1. Effect of this policy on wages and employment of existing unskilled labours

A : The effect of this policy on the existing unskilled labours will not have any adverse impact on them as the wages for unskilled labours will almost be uniform and in terms of employment they might have the pressure to perform and provide the maximum output for their retention.

2. Income of owner and management

The income level of owners and management will tend to increase as immigrants who are unskilled would have been paid less and hence the variable cost will be reduced also, since they have bought immigrants to work the unskilled workers will not have an option to quit the job but to serve for a certain fixed period of time and hence the cost of recruitment and training will also be avoided which will help in increase of the income of the owner and management.

3. Longer term wages, salaries and profits.

A : The more the employees the more the output and hence if longer term wages and salaries will increase relatively to the profits.