If the economy is producing at a level above full employment, wages will have to fall until equilibrium is restored.

Question

Quizplus · Accepted Answer

If the economy is producing at a level above full employment, there is a shortage of labor which means that wages are likely to rise due to increased competition among firms. This can lead to inflation and other economic issues. Therefore, wages are unlikely to fall until the economy returns to a level of full employment.

If the Economy Is Producing at a Level Above Full