Some economists believe that the behavior of unemployment in Europe and in the United States during the 1980s and 1990s
A)was the same because both markets experienced adverse labor market shocks.
B)differed because the real wage in Europe was rigid.
C)was the same because the real wage in Europe and the United States moved together.
D)differed because the United States experienced adverse labor market shocks but Europe did not.

Question

Quizplus · Accepted Answer

Some economists believe that the behavior of unemployment in Europe and the United States during the 1980s and 1990s differed because the real wage in Europe was rigid. In other words, the wages in Europe were slow to adjust downward, which made it more difficult for firms to respond to changes in the labor market by laying off workers, leading to higher unemployment rates. In contrast, the real wage in the United States was more flexible, allowing firms to adjust to changing economic conditions more quickly, which contributed to lower unemployment rates.

Some Economists Believe That the Behavior of Unemployment in Europe