Assume that a country experiences a reduction in productivity that shifts the labour demand curve downward and to the left. If the labour market were always in equilibrium, this would lead to:
A)a lower real wage and a rise in unemployment.
B)a lower real wage and no change in unemployment.
C)a lower real wage and less unemployment.
D)no change in real wage or in unemployment.

Question

Quizplus · Accepted Answer

In equilibrium, the reduction in productivity decreases the demand for labor, leading to a lower real wage. However, since the labor market is always in equilibrium, the quantity of labor supplied equals the quantity of labor demanded, resulting in no change in unemployment.

Assume That a Country Experiences a Reduction in Productivity That