When the real wage falls,as a result of a rise in the price level
A)the demand for labor will fall.
B)the supply of labor will rise.
C)firms will hire more labor as they move down the demand curve for labor.
D)the nominal wage will fall.

Question

Quizplus · Accepted Answer

When the real wage falls due to a rise in the price level, firms perceive labor to be cheaper, which typically leads them to hire more labor as they move down their demand curve for labor. This is because the cost of employing an additional unit of labor, in real terms, has decreased, making it more attractive for firms to increase employment.

When the Real Wage Falls,as a Result of a Rise