It is profitable to hire more labor if the price level ________ and the money wage rate ________.
A)rises;falls
B)falls;rises
C)falls;does not change
D)does not change;rises
E)rises;rises by the same percentage

Question

Quizplus · Accepted Answer

When the price level rises, the cost of goods and services increases. This means that firms can charge more for their output and make more profits. As a result, they have more money to spend on labor. On the other hand, if the money wage rate falls, it means that workers are willing to work for less money, which makes it more profitable for firms to hire additional labor. Therefore, if the price level rises and the money wage rate falls, it is profitable for firms to hire more labor.

It Is Profitable to Hire More Labor If the Price