Unemployment would decline in the face of rising productivity if:
A)real wages only increased sluggishly.
B)real wages adjusted instantaneously.
C)labor supply remained fixed in the face of increases in labor demand.
D)the demand for labor did not respond to the rising productivity.

Question

Quizplus · Accepted Answer

If real wages increase sluggishly, then employers would choose to increase their demand for labor as their costs of labor are not increasing at the same rate as their productivity, leading to a decline in unemployment. If real wages adjusted instantaneously, then employers would not have an incentive to hire more workers, leading to no change in unemployment. If labor supply remained fixed, then there would be upward pressure on wages which would counteract the decline in unemployment. If the demand for labor did not respond to rising productivity, then there would be no change in employment.

Unemployment Would Decline in the Face of Rising Productivity If