If wage rigidity holds the real wage above the equilibrium level, an increase in the supply of labour will _____ the number unemployed.
A)increase
B)decrease
C)not change
D)possibly increase, decrease, or leave unchanged

Question

Quizplus · Accepted Answer

When the real wage is above the equilibrium level due to wage rigidity, an increase in the supply of labor will lead to more people willing to work at the current wage, thus increasing unemployment as the quantity of labor supplied exceeds the quantity demanded.

If Wage Rigidity Holds the Real Wage Above the Equilibrium