Unemployment would decline in the face of rising productivity if:
A) real wages only increased sluggishly.
B) real wages adjusted instantaneously.
C) labour supply remained fixed in the face of increases in labour demand.
D) the demand for labour did not respond to the rising productivity.

Question

Quizplus · Accepted Answer

If real wages only increase sluggishly, then the cost of hiring workers is not increasing rapidly enough to negate the benefits of increased productivity. This means that firms can afford to hire more workers, which would decrease unemployment. If real wages adjusted instantaneously, the cost of hiring workers would increase with productivity, which would negate any decrease in unemployment. Labour supply remaining fixed would not cause unemployment to decrease, as there would still not be enough jobs for everyone. And if the demand for labour did not respond to rising productivity, then there would be no reason for unemployment to decrease.

Unemployment Would Decline in the Face of Rising Productivity If