The labour market in the diagram below begins in equilibrium with a real wage of $10 and quantity employed of 1000.
FIGURE 31- 1
-Refer to Figure 31- 1. Given the labour supply and labour demand curves, D0 and S0, which of the following statements is true in the New Classical theory of unemployment?
A) At any wage below $10, there is an excess demand for labour, and the wage will be driven down.
B) At any wage above $10, there is an excess demand for labour, and the wage will be driven down.
C) At any wage above $10, there is persistent, involuntary unemployment.
D) At any wage below $10, there is an excess supply of labour, and the wage will be driven up.
E) At any wage above $10, there is an excess supply of labour, and the wage will be driven down.
Correct Answer:
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