A look at macroeconomic data across countries reveals that when economies experience recessions, unemployment rates rise, but wages fall very little, if at all. Which of the following is most likely to support this observation?
a. Wages are determined by the interaction of the forces of labor demand and supply.
b. The demand for labor is derived demand and hence does not fall during recessions.
c. The labor market usually exhibits perfect competition.
d. The labor supply curve becomes perfectly inelastic during recessions.
e. Long term labor contracts make the wage rates sticky downwards.
e
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Suppose it takes Paul 3 hours to bake a cake and 2 hours to move the lawn, and suppose it takes Tom 2 hours to bake a cake and 1 hour to mow the lawn. Which of the following statements is correct?
A. Paul has the comparative in baking cakes B. Paul has the comparative in mowing the lawn C. Paul has the absolute advantage in baking cakes D. Paul has the absolute advantage in mowing the lawn.
Suppose you choose an investment that has historically generated an averagenominal return of 5 percent per year. Explain how inflation and risk may affect your future real rate of return on this investment
What will be an ideal response?
On hot summer days, electricity-generating capacity is sometimes stretched to the limit. At these times, electric companies may ask people to voluntarily cut back on their use of electricity. An economist would suggest that
a. every electric customer has an incentive to prevent the system from overloading, so this voluntary approach is the most efficient. b. it would be more efficient if the electric company raised its rates for electricity at peak times. c. it would be more efficient to have a lottery to decide who had to cut back their use of electricity at peak times. d. it would be more efficient to force everyone to cut their usage of electricity by the same amount.
To decrease the nation's money supply, the Fed can:
A. decrease the reserve requirement. B. buy bonds. C. decrease the discount rate. D. increase the discount rate.