Suppose that the demand for labour decreases due to an economic downturn,and union workers are in the first year of a three-year labour contract.With respect to these union labourers,the economic downturn will most likely ________ the nominal wage and ________ the quantity of labour hired.

Question

Quizplus · Accepted Answer

The nominal wage is fixed by the contract for three years, so it will not change. However, the quantity of labor hired may decrease as firms adjust to the decreased demand for labor.

Suppose That the Demand for Labour Decreases Due to an Economic