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Unformatted text preview: situation. 7. a. 5% b. 60% for 1 month and 40% for 6 months c. 3 months is average d. 80% Analytical Questions: 4. a. She would supply less labor due to the income effect related to her increased wealth. b. She would work more due to the substitution effect of a higher real wage. c. She would work less due to the substitution effect of a temporarily lower real wage. 5. This tax will decrease the demand for labor, increase unemployment, and lower the real wage. 6. Yes, the unemployment rate and the unemployment ratio can both rise during the same month. Yes, the participation rate can fall as the employment rate rises....
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- Fall '07