If wages are sticky downward, an increase in labor:
A) supply increases the wage rate.
B) demand decreases the wage rate.
C) demand increases the wage rate.
D) none of the above

Question

Quizplus · Accepted Answer

If wages are sticky downward, it means that they are resistant to decreasing. Therefore, an increase in labor demand would lead to firms bidding against each other for the available labor, which would increase the wage rate. This is because workers are less likely to accept a decrease in their wages due to the stickiness.

If Wages Are Sticky Downward, an Increase in Labor