1)The government sets a minimum wage above the current equilibrium wage.

a. What effect does the minimum wage have on the market equilibrium?

b. What are its effects on consumer surplus, producer surplus, and total surplus?

c. Who are the customers and who are the producers?

2)The main goal of macroeconomic policy is to:

a. Continue to increase GDP growth.

b. Move the economy toward potential GDP.

c. Balance the federal budget.

d. Expand the trade surplus.

3)What is the difference between "the law of one price" and "PPP?"

1)a) As the input prices are an image of supply and wages are basically the price of labour input to production, so if the minnimum wage will increase, the supply curve will be shifted up relevent to the amount of wages increased and hence the market equilibrium will increase.

b) Before the introduction of minimum wage, the entire surplus was above supply curve and below demand curve. After the increase of minimum wage, there will be loss of surplus known as deadweight loss.

c) After the introduction of minimum wages, consumers lost surplus in some areas but gained surplus in others while the producers have lost the surplus.

2)The three primary aims of macroeconomics are to create full employment, increase stability, and promote economic growth. In combination, these three factors help improve the GDP and general economic wellbeing of a country or region. Therefore, the primary objective of macroeconomic policy is b. moving the economy toward potential GDP.

3)The law of one price is a subset of the concept of the Purchasing Power Parity. The law of one price states that the price of the same security and asset traded will have an identical price irrespective of their location. This is the case when the prices are expressed in terms of common currency and there is an existence of free competition.

The differences between the asset prices in different location eliminates due to the arbitrage opportunity whereas PPP that is the purchasing power parity states that the same price of the identical goods in two countries will lead to the same value of currencies.