A surplus of labor is eliminated by ________ in the real wage rate and a shortage of labor is eliminated by ________ in the real wage rate.

Question

Quizplus · Accepted Answer

A surplus of labor means there are more workers than there are jobs available, which puts downward pressure on the wage rate. To eliminate the surplus, the wage rate must decrease, making it less costly for employers to hire more workers. On the other hand, a shortage of labor means there are more job openings than there are workers available, which puts upward pressure on the wage rate. To eliminate the shortage, the wage rate must increase, making it more attractive for workers to apply for and accept those job openings. Therefore, the correct answer is (C) - a decrease in the real wage rate eliminates a surplus of labor, while an increase in the real wage rate eliminates a shortage of labor.

A Surplus of Labor Is Eliminated by ________ in the Real