In the fooling model,real wages
A)are countercyclical.
B)are procyclical.
C)are constant.
D)show no clear cyclical pattern.

Question

Quizplus · Accepted Answer

In the fooling model, real wages are countercyclical, meaning they move in the opposite direction of the business cycle. When the economy is in a recession, real wages tend to rise, and when the economy is in a boom, real wages tend to fall. This is because in a recession, there is less demand for labor, so employers are willing to pay higher wages to attract workers. In a boom, there is more demand for labor, so employers can pay lower wages and still attract workers.

In the Fooling Model,real Wages