One labor market quirk that helps explain why unemployment goes up so much in a recession is that
A) a price ﬂoor called a "minimum wage law" exists for the labor market.
B) wages are ﬂexible upward but "sticky" downward.
C) ﬁrms are "demanders" of labor, rather than suppliers.
D) machines could "replace" humans in the labor market.

Question

Quizplus · Accepted Answer

Wages tend to be "sticky" downward, meaning that they are slow to adjust downward even when there is a decrease in demand for labor. This results in firms laying off workers instead of decreasing wages, leading to an increase in unemployment during recessions.

One Labor Market Quirk That Helps Explain Why Unemployment Goes