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The increase in the wage rate from $10 to $20 has caused what?

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drolfe74 | eNotes Newbie

Posted April 28, 2013 at 5:23 PM via web

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The increase in the wage rate from $10 to $20 has caused what?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted April 28, 2013 at 5:35 PM (Answer #1)

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Without knowing more about the context of this question, it will be very hard to give you the answer that you need.  An increase in wages of this magnitude could lead to a number of things, depending on the overall circumstances.

For example, an increase of that magnitude in wages could cause a major surplus in the number of workers.  Let us say that one particular industry raises its wages in this way.  People would rush to work in that industry.  There would come to be many more people who wanted to work in that industry than there were before.

As another example, such an increase in wages across the whole economy could lead to inflation.  With everyone having so much more money, demand for most things would rise (all other things being equal).  Unless the economy could also rapidly come to produce more things, prices would rise and we would have “demand-pull” inflation.

Therefore, we cannot really know what the answer to this question is.  There are many possible effects of such an increase.  The answer depends very much on the specific circumstances of the wage increase. 

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