When aggregate demand declines, many firms may reduce employment rather than wages because wage reductions may
A)reduce per-unit production costs.
B)reduce worker morale and work effort and thus lower productivity.
C)increase the firms' cost of raising financial capital.
D)reduce the demands for their products.

Question

Quizplus · Accepted Answer

Wage reductions may reduce worker morale and work effort and thus lower productivity.

When Aggregate Demand Declines, Many Firms May Reduce Employment Rather