Podcast
Questions and Answers
What happens when there is a shortage of labour in the labour market?
What happens when there is a shortage of labour in the labour market?
At what point does equilibrium occur in the labour market?
At what point does equilibrium occur in the labour market?
What effect does an increase in the real wage rate have on the quantity of labour supplied?
What effect does an increase in the real wage rate have on the quantity of labour supplied?
Which condition indicates that an economy is at full employment?
Which condition indicates that an economy is at full employment?
Signup and view all the answers
What occurs in the labour market when there is a surplus of labour?
What occurs in the labour market when there is a surplus of labour?
Signup and view all the answers
What happens to the supply of labour curve when there is an increase in the labour supply?
What happens to the supply of labour curve when there is an increase in the labour supply?
Signup and view all the answers
Which of the following factors does NOT affect the quantity of labour supplied?
Which of the following factors does NOT affect the quantity of labour supplied?
Signup and view all the answers
What is likely to occur when there is a surplus of labour due to population growth?
What is likely to occur when there is a surplus of labour due to population growth?
Signup and view all the answers
How is labour productivity defined?
How is labour productivity defined?
Signup and view all the answers
Which outcome is associated with an increase in labour productivity?
Which outcome is associated with an increase in labour productivity?
Signup and view all the answers
Study Notes
Growth of Labour Supply
- Labour supply curve shifts rightward with growth in labour supply.
- Changes in labour quantity are influenced by:
- Average hours worked per employee.
- Employment-to-population ratio.
- Size of the working-age population.
- Population growth increases labour supply while demand remains unchanged:
- Results in labour surplus.
- Unemployment rises above the natural rate.
- Real wages decline to balance surplus.
Growth of Labour Productivity
- Labour Productivity defined as the output of real GDP per hour of labour.
- Increased labour productivity expands production possibilities.
- Labour quantity supplied is influenced by the real wage rate:
- Higher real wages lead to increased supply of labour due to the upward slope of the supply curve.
Aggregate Labour Market Dynamics
- Labour shortage occurs when demand exceeds supply:
- Real wages increase to resolve shortages.
- Labour surplus occurs when supply outstrips demand:
- Real wages decrease to eliminate surpluses.
- Equilibrium is achieved when supply equals demand:
- Economy operates at full employment.
- Real GDP matches potential GDP.
- Unemployment stabilizes at the natural rate.
Demand for Labour
- Quantity of labour demanded relates inversely to real wage rates:
- Higher wages decrease the quantity of labour demanded.
- Demand curve slopes downward, indicating this relationship.
Real Wage Rate Calculation
- Real wage rate is determined by the nominal wage adjusted for the price level:
- Formula: Real Wage Rate = Nominal Wage Rate / Price Level.
Overview of the Labour Market in Macroeconomics
- Assumes a unified labour market defining employed labour quantity and real GDP production.
- Supply of labour represents the connection between the quantity of labour and real wage rates.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
Explore the dynamics of labour supply and its effects on the economy. This quiz addresses how different factors like working hours, employment ratios, and population growth influence the labour market, shifting the supply curve. Understand the implications of a growing labour supply, including potential surpluses and unemployment trends.
