1. Consider the classic competitive labor market. W S L DL Which of the following statements is most accurate? If the actual wage is stuck above the equilibrium wage (perhaps via labor contracts) and then increases further (with no shifts in demand and supply of labor), then the unemployment rate would increase. If the actual wage were stuck above the equilibrium wage, an increase in demand for labor (rightward shift) would make the unemployment rate go higher. If the actual wage is stuck above the equilibrium wage, the wage will tend to rise further once the stickiness of wages is gone (perhaps due to labor contracts being up for renewal. O None of the other options. ○ If the actual wage were stuck above the equilibrium wage, we would have a shortage of workers (excess demand for labor).
1. Consider the classic competitive labor market. W S L DL Which of the following statements is most accurate? If the actual wage is stuck above the equilibrium wage (perhaps via labor contracts) and then increases further (with no shifts in demand and supply of labor), then the unemployment rate would increase. If the actual wage were stuck above the equilibrium wage, an increase in demand for labor (rightward shift) would make the unemployment rate go higher. If the actual wage is stuck above the equilibrium wage, the wage will tend to rise further once the stickiness of wages is gone (perhaps due to labor contracts being up for renewal. O None of the other options. ○ If the actual wage were stuck above the equilibrium wage, we would have a shortage of workers (excess demand for labor).
Chapter18: Introduction To Macroeconomics: Unemployment, Inflation, And Economic Fluctuations
Section: Chapter Questions
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