A tremendous flood along the St.Lawrence Seaway destroys thousands of factories,reducing the nation's capital stock by 5%.What happens to current employment and the real wage rate?
A)Both employment and the real wage rate would increase.
B)Both employment and the real wage rate would decrease.
C)Employment would increase and the real wage would decrease.
D)Employment would decrease and the real wage would increase.

Question

Quizplus · Accepted Answer

The destruction of factories reduces the nation's capital stock, which in turn reduces the demand for labor. This leads to a decrease in both employment and the real wage rate.

A Tremendous Flood Along the St