If wage rigidity holds the real wage above the equilibrium level, an increase in the supply of labor will ______ the number unemployed.
A) increase
B) decrease
C) not change
D) possibly increase, decrease, or leave unchanged

Question

Quizplus · Accepted Answer

Wage rigidity holding the real wage above the equilibrium level implies that there is a surplus of labor (i.e. unemployment). An increase in the supply of labor will exacerbate this surplus, leading to an increase in the number of unemployed workers.

If Wage Rigidity Holds the Real Wage Above the Equilibrium