Which of the following contributes to the downward inﬂexibility of wages, according to mainstream economists?
A) eﬃciency wages
B) a monetary rule
C) price-level surprises
D) coordination failures

Question

Quizplus · Accepted Answer

Mainstream economists argue that the existence of efficiency wages contributes to downward inflexibility of wages. Efficiency wages are wages that are deliberately set above the market-clearing level to motivate workers to perform better and reduce shirking or turnover. This makes it harder for employers to lower wages in response to changes in demand or supply without risking a loss of productivity or quality from their workers.

Which of the Following Contributes to the Downward Inﬂexibility of Wages