When the real wage rate exceeds the equilibrium real wage rate, there is a ________ of labor and the real wage rate will ________.

Question

Quizplus · Accepted Answer

When the real wage rate exceeds the equilibrium real wage rate, it means that wages are higher than what employers are willing to pay given the level of demand for labor. This indicates a surplus of labor, as there are more workers willing to work at this higher wage rate than there are jobs available. To eliminate this surplus, employers will lower the wage rate, causing the real wage rate to fall, until it reaches the equilibrium level where the quantity of labor demanded equals the quantity of labor supplied.

When the Real Wage Rate Exceeds the Equilibrium Real Wage