Asked by Jasmine Abunaim on May 19, 2024
Verified
The simple immigration model assumes that the capital stock is constant in each country. If this assumption is relaxed, then the
A) rise in business income in the high-wage country will increase the return on capital, which will increase the demand for labor.
B) fall in business income in the high-wage country will decrease the return on capital, which will increase the demand for labor.
C) rise in business income in the high-wage country will increase the return on capital, which will decrease the demand for labor.
D) fall in business income in the high-wage country will decrease the return on capital, which will decrease the demand for labor.
Capital Stock
The total value of all physical assets a company uses in its production process.
Business Income
Income earned from the operation of a business or the sale of goods and services.
High-wage Country
A country characterized by relatively high levels of wages for its workers compared to other nations.
- Understand how immigration influences wage levels and the need for labor, considering different levels of capital investment.
Verified Answer
JD
Jamin DanielMay 25, 2024
Final Answer :
A
Explanation :
When the assumption of constant capital stock is relaxed, an increase in business income in a high-wage country leads to a higher return on capital. This, in turn, increases the demand for labor as businesses expand and invest more, requiring more workers to support increased production and services.
Learning Objectives
- Understand how immigration influences wage levels and the need for labor, considering different levels of capital investment.
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