Wage flexibility is one of the conditions necessary for an economy to be able to bring itself out of a recessionary gap.

Question

Quizplus · Accepted Answer

When wages are flexible, meaning they can easily adjust to changes in supply and demand, it allows for firms to lower their costs and potentially lower prices, which in turn can increase demand and production, helping to close the recessionary gap. However, if wages are inflexible and cannot adjust, it can lead to firms having to lay off workers or reduce production, worsening the recessionary gap.

Wage Flexibility Is One of the Conditions Necessary for an Economy