Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to:
A)a wealth effect.
B)a multiplier effect.
C)an increase in aggregate supply.
D)a price level that is inflexible downward.

Question

Quizplus · Accepted Answer

Collective bargaining agreements that prohibit wage cuts for the duration of the contract result in a downward inflexibility of the price level, as wages cannot be lowered during economic downturns or other events that may require a reduction in costs. This can lead to an imbalance in the labor market and potentially harm the overall economy.

Collective Bargaining Agreements That Prohibit Wage Cuts for the Duration