It is likely that involuntary unemployment would be reduced if wage rates were
A) rigid.
B) perfectly flexible.
C) indexed to upward movements in the price level but downwardly inflexible.
D) inversely related to labor productivity.
E) positively related to the unemployment rate.

Question

Quizplus · Accepted Answer

Flexible wage rates would allow for adjustments to changes in the labor market, such as changes in labor supply and demand. This would help to reduce involuntary unemployment as wage rates can adjust to balance the labor market. Rigid wage rates, on the other hand, can lead to imbalances in the labor market and chronic unemployment.

It Is Likely That Involuntary Unemployment Would Be Reduced If