) Are wages more flexible upward or downward? Explain what effect this has during a time of expansion and a time of recession.
What will be an ideal response?
Wages are flexible upward, workers are happy to accept an increase in their wage rate. However, workers become discouraged and resent decreases in wage, this makes wages sticky downward. During a time of expansion businesses are willing to increase wages and workers are happy to accept them. During a recession, businesses would like to decrease the wage rate, but wages are sticky. Since it is difficult for managers to cut wages, many opt to layoff employees. This is why unemployment increases significant during a recession. If wages were flexible downward and falling wages would help keep unemployment relatively low.
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Suppose that in a free market, 2,000 patients purchase an operation to receive an artificial heart at a price of $500,000 per operation. Without the heart, each patient will die. The government decides this price is too high and imposes a maximum price of $200,000. Everything else equal,
A. more patients will now die. B. fewer patients will now die. C. more patients will now die only if the demand curve is vertical. D. more patients will now die only if the demand curve is horizontal.
Actual output exceeds the natural output when
A) the actual budget deficit is above the structural deficit. B) the actual budget deficit is below the structural deficit. C) the structural deficit is positive. D) the structural deficit is negative.
When the dollar depreciates, the cost to Americans of foreign goods
a. rises and the CPI falls. b. rises and the CPI rises. c. falls and the CPI rises. d. falls and the CPI falls.
The price of gasoline is $3.30 per gallon. If one gallon of gasoline provides the same marginal utility as a gallon of milk, how much will the gallon of milk cost at consumer equilibrium?
a. $1.00 b. $1.65 c. $3.30 d. $6.60