A war destroys much of the capital stock in the country of Omega. As a result, holding other factors constant, the real wage in Omega will ________ and employment in Omega will ________.

Question

Quizplus · Accepted Answer

A smaller capital stock in Omega causes workers to be less productive, which decreases the demand for labor and puts downward pressure on wages. With lower wages, workers desire fewer hours of work and employment decreases too.

A War Destroys Much of the Capital Stock in the Country