Th3.5: Minimum Wage - Macroeconomic Effects Flashcards

1
Q

What are the four macroeconomic effects?

A

reduce inequality
rise in AD
worsened public finances
reduction in competitiveness

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Reduce inequality

A

they are able to reduce inequality

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Rise in AD

A

since the poorest people see a rise in income and they have a high MPC - this will lead to economic growth and employment :D

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Worsened public finances

A

as the government employs many people on the minimum wage

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Reduction in competitiveness

A

the rise in business costs will lead to a reduction in competitiveness, which will negatively affect the trade balance and reduce the net trade component of AD. it will also increase SRAS, causing inflation in the short term

How well did you know this?
1
Not at all
2
3
4
5
Perfectly