If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real gdp will fall & price level might rise, fall, or stay the same and in the long run, the price level might rise, fall, or stay the same but real GDP will be lower.
This refers to the lowest remuneration that an employers can legally pay their employee as the the price floor below which employees may not sell their labor.
The effect of this on economy is noted as a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real gdp will fall & price level might rise, fall, or stay the same and in the long run, the price level might rise, fall, or stay the same but real GDP will be lower.
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