question archive If wage rigidity holds the real wage above the equilibrium level, an increase in the demand for labor will _____ the number unemployed
If wage rigidity holds the real wage above the equilibrium level, an increase in the demand for labor will _____ the number unemployed
Subject:EconomicsPrice:2.88 Bought3
If wage rigidity holds the real wage above the equilibrium level, an increase in the
demand for labor will _____ the number unemployed.
a) increase,
b) decrease,
c) not change,
d) possibly increase, decrease, or leave unchanged.
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- The correct option is (b). Decrease.
Generally, when the real wages are above the equilibrium level of wages and the wage rigidity holds then initially, there is a surplus of labor in the economy. However, as the demand for labor rises then this surplus labors will decline and, as a result, there is a decline in the number of unemployed in the economy.
