17 Case Analysis (20) Skilled Labour in Mexico In December 2000 Mexico was experiencing a shortage...

 

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17 Case Analysis (20) Skilled Labour in Mexico In December 2000 Mexico was experiencing a shortage of skilled labour. This had begun to create bottle neck to increased growth and pushed up wage rates. For example, in Chihuahua, a northern border state, a centre for assembly-for-exports plants, real wages had risen by 32 per cent over the year. The government was secking to raise productivity, in the short run, by introducing more flexible labour laws and, in the long run, by improving education and training. (1) Using a Keynesian LRAS curve, explain at what position on the curve the Mexican economy was seemingly operating in December 2000? (6) (ii) Illustrate, and explain, the effect of: (a) a rise in wage rates on the SRAS curve, (b) improved education and training on the LRAS curve. (7+7 -14) 17 Case Analysis (20) Skilled Labour in Mexico In December 2000 Mexico was experiencing a shortage of skilled labour. This had begun to create bottle neck to increased growth and pushed up wage rates. For example, in Chihuahua, a northern border state, a centre for assembly-for-exports plants, real wages had risen by 32 per cent over the year. The government was secking to raise productivity, in the short run, by introducing more flexible labour laws and, in the long run, by improving education and training. (1) Using a Keynesian LRAS curve, explain at what position on the curve the Mexican economy was seemingly operating in December 2000? (6) (ii) Illustrate, and explain, the effect of: (a) a rise in wage rates on the SRAS curve, (b) improved education and training on the LRAS curve. (7+7 -14)

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Answer Explanation i Due to shortage of labor there was rise in wage rate Government ... View the full answer