If you were the president of a developing country what are s

If you were the president of a developing country, what are some of the specific policies you would promote to accelerate economic growth? T T T ? Paragraph v Arial 3 (12pt) ??·?·T JMashups Words:0 Path: p QUESTION 10 Suppose the minimum wage increased to $15. What impact would this have on aggregate demand? What about aggregate supply? What would be the combined effect on equilibrium price level and output?

Solution

When the minimum wage is increased to $15, then the aggregate demand is going to rise. This is because now as people have higher income with them due to the higher minimum wage, they are going to spend more for their consumption. Hence, higher consumption of goods will lead to a higher demand for goods and hence the aggregate demand for goods will rise. On the other hand, since due to higher minimum wage the cost of production has risen, the producers will lower the supply and thus aggregate supply shall fall. Due to a combined effect of a rise in AD and fall in AS, the prices are going to rise. However, the effect on the level of output will depend on whether the rise in the AD is greater or the fall in AS is greater.