If the minimum wage law is repealed and employers begin using efficiency wages far less frequently, it would ___ unemployment and ____ the natural rate of unemployment:
A)Increase; increase.
B)Increase; not change.
C)Decrease; decrease.
D)Decrease; not change.

Question

If the minimum wage law is repealed and employers begin using efficiency wages far less frequently, it would ___ unemployment and ____ the natural rate of unemployment:
A)​Increase; increase.
B)​Increase; not change.
C)​Decrease; decrease.
D)​Decrease; not change.

Quizplus · Accepted Answer

Efficiency wages are wages that employers set above the equilibrium wage to boost worker productivity and morale, which can reduce turnover and shirking. If the minimum wage law is repealed and employers use efficiency wages less frequently, it could lead to a decrease in wages for some workers. This could make it more affordable for employers to hire more workers, potentially decreasing unemployment. Additionally, with lower wages and more people being hired, the natural rate of unemployment, which includes frictional and structural unemployment but not cyclical unemployment, could also decrease as the labor market adjusts to these changes.

If the Minimum Wage Law Is Repealed and Employers Begin