The equilibrium real wage rate
A)is equal to the nominal wage rate.
B)equals the actual real wage rate in short-run equilibrium.
C)equals the actual real wage rate at every point on the SS curve.
D)is determined by the intersection of the labor supply and demand curves.

Question

Quizplus · Accepted Answer

The equilibrium real wage rate is determined by the intersection of the labor supply and demand curves, where the quantity of labor supplied equals the quantity of labor demanded. This is because at the equilibrium real wage rate, the market clears, i.e., there is no excess supply or demand of labor. Therefore, choice D is the correct answer. Option A is incorrect because the nominal wage rate may be different from the real wage rate due to inflation. Option B is incorrect because the actual real wage rate may not always coincide with the equilibrium real wage rate in the short run. Option C is incorrect because the actual real wage rate may deviate from the equilibrium real wage rate if there are changes in labor supply or demand due to factors such as technology, demographics, or government policies.

The Equilibrium Real Wage Rate