Question

with a few words, can you answer this question?

How is the aggregate supply curve affected by (a) minimum wage laws (b) Social Security payroll taxes (c) Social Security retirement benefits and (d) tighter border security?

Answer 1

A) aggregate supply curve will be shifting to the left. this is because employment is reduced when there are minimum wage laws. Employers might use capital in place of low skilled workers or they might hire high skilled workers only at a higher wage rate. In both cases cost of production is increased which reduces the quantity of goods and services produced

B) employers are required to contribute in payroll taxes which increases their wage bill. It also requires the workers to contribute which means that employment is reduced and overproduction is also decreased. Aggregate supply curve is likely to be shifting to the left

C) social security benefits for retirement will encourage more workers to enter the labour force and to continue to work till their retirement. This increases average labor hours and more production will be done with same labor force. this will increase the number of goods and services produced and it will shift the aggregate supply curve to the right

D). Tighter border security will discourage illegal immigration. It is not expected that this is likely to influence the aggregate supply if prior to the new law, there was no immigration. However in one case, where previously illegal immigration was a strong case in the economy, tighter border security will reduce theses cases and lower overall production of goods and services. Aggregate supply curve will be shifting to the left