The wage- adjustment process is asymmetrical because
A)employers delay wage increases in a boom but lay off workers quickly during a slump.
B)wages rise quickly in a boom but fall slowly during a slump.
C)factor prices fluctuate more frequently than goods prices.
D)goods prices rise more quickly than factor prices.
E)taxes rise quickly in a boom but do not fall during a slump.

Question

Quizplus · Accepted Answer

The wage-adjustment process is asymmetrical because wages tend to rise quickly in a boom when there is a shortage of labor, but they fall slowly during a slump when there is an oversupply of labor. This asymmetry is due to factors such as worker resistance to wage cuts, collective bargaining agreements, and minimum wage laws that prevent wages from falling below a certain level. In contrast, employers may delay wage increases during a boom to maintain profitability, but they can lay off workers quickly during a slump to reduce costs. Therefore, the adjustment process for wages is asymmetric.

The Wage- Adjustment Process Is Asymmetrical Because