each of the four possibilities: increase in demand, decrease in demand, increase in supply, and decrease

in supply.

Critical Thinking Questions

21. Other than the demand for labor, what would be another example of a “derived demand?”

22. Suppose that a 5% increase in the minimum wage causes a 5% reduction in employment. How would this

affect employers and how would it affect workers? In your opinion, would this be a good policy?

23. Under what circumstances would a minimum wage be a nonbinding price floor? Under what

circumstances would a living wage be a binding price floor?

24. Suppose the U.S. economy began to grow more rapidly than other countries in the world. What would be

the likely impact on U.S. financial markets as part of the global economy?

25. If the government imposed a federal interest rate ceiling of 20% on all loans, who would gain and who

would lose?
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