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

Question

Quizplus · Accepted Answer

When the real wage is rigid, it does not adjust to changes in labor demand, leading to excess supply of labor, or unemployment, when demand decreases.

Assume That a Country Experiences a Reduction in Productivity That