Questions:
1. Some economists have expressed their concerns that the US official unemployment rate has shortcomings and is too narrow to capture the true unemployment picture. Use the materials posted on Blackboard and any other resources to assist you in answering the following:
a. Define the US Bureau of Labor Statistics (BLS) official unemployment rate.
b. Briefly explain two major shortcomings of the official unemployment rate.
c. Define the BLS U-6 unemployment measure, compare the official rate to the broader U-6 rate and briefly explain the major differences. Would the broader measure be more appropriate in capturing the true unemployment picture?
2. Below is an extract from the US National Employment Law Project website (https://www.nelp.org/index.php/site/issues/category/federal_minimum_wage/):
Federal law allows employers to pay tipped workers - including restaurant servers, car wash workers, and nail salon technicians among others - a lower minimum wage........ "
Use the materials posted on Blackboard and any other resources to assist you in answering the following:
a. What is the US Federal minimum wage today and who is covered?
b. What is the Federal sub-minimum wage that restaurant servers receive?
c. What would be the impact on output and the price of output if restaurant industry employers had to pay restaurant servers the federal minimum wage throughout the US? In which direction would the economy's AS curve shift? Low income earners spend more on consumption as a percentage of their salary than high income earners. What would be the impact on output and the price of output if restaurant servers were paid the Federal minimum wage throughout the US? In which direction would the economy's AD curve shift? Use a diagram of the AS-AD model to explain your answer.
3. Mankiw's Macroeconomics s textbook power-point slide below suggests that we can move down the AD curve and make an economic recovery to full employment- "Recovery through Deflation". Explain the shortcomings of the AS-AD Model when the economy faces deflation. Use the example of the Great Depression in your answer.