A Level Economics AQA Practice Exam

What does the National Minimum Wage represent?

1. A maximum wage that can be paid to employees

2. A wage floor set by the government

3. An optional wage for employers

4. A recommended wage by industry standards

The correct answer is: A wage floor set by the government

The National Minimum Wage represents a wage floor set by the government. It establishes the lowest amount that employers can legally pay their workers, aiming to ensure a basic standard of living for employees. This minimum wage serves to protect low-income workers from exploitation and helps to reduce poverty by guaranteeing that all workers receive a certain minimum level of pay for their labor. In the context of labor economics, setting a minimum wage can also have implications for employment levels, as it impacts the cost of hiring labor and can influence decisions made by employers regarding hiring and wage allocation. When the minimum wage is set appropriately, it can increase the income of low-wage workers without causing significant unemployment. Other choices do not accurately describe the National Minimum Wage. It is not a cap on wages; rather, it is a legal minimum. It is not optional, as employers are mandated to comply with the minimum wage laws. Lastly, the National Minimum Wage is not simply a recommendation; it is a legal requirement enforced by the government.