9. In a small open economy if exports equal $16 billion and imports equals $19 billion,...

In a small open economy if exports equal $16 billion and imports equals $19 billion, then there is a trade ________ and ________ net capital outflows.

a. deficit; negative

b. surplus; positive

c. surplus; negative

d. deficit; positive

10.

Costco chooses to pay its workers a median salary of $20 an hour, even though the federal minimum wage is currently set at $7.25 an hour. This would be an example of:

a. efficiency wage theory.

b. adverse selection

c. irrational wage theory

d. wage fund theory

e. collective bargaining

Solutions

Expert Solution

9- When there is exports greater than the import the bop lies in surplus and similarly when import is greater than the export then there is deficit in bop.As example given on question 9 that's is export is $16 billion and import is $19 billion that's simply implies there is deficit in balance of payment which leads to negative net capital outflows in the econmy. That's why option a is correct ...expect it all other options are wrong

10- The Costco chooses to pay a wage $20 for an hour even the federal minimum wage rate is fixed at $7.5 per hour. This is an example of efficiency wage theory . Efficiency wage theory simply explains that the wage paid to the labour is higher than the minimum equilibrium wage . In the question the equilibrium wage is $7.5 but the labourer are getting $20 wage for one hour. This simply is an example of efficiency wage theory .

Adverse selection is related to market failure ,,,..There is nothing like a theory on irrational wgae .,,wage fund theory is given by Adam Smith and J.S Mill...Bargaing theory of wage is given by John Davidson ....Expect option 1 all other options are wrong for question number 10

Rahul Sunny answered 1 year ago

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