During an unanticipated deflation, the real wage rate ________ and employment ________.
A) falls; decreases
B) falls; increases
C) rises; decreases
D) rises; increases

Question

Quizplus · Accepted Answer

During deflation, the real wage rate rises because the purchasing power of money increases, leading to higher real wages. This can result in decreased employment as employers may not afford to pay the higher real wages.

During an Unanticipated Deflation, the Real Wage Rate ________ and Employment