Suppose the wage rate in the labor market is $15 and the demand for labor decreases. If wages are sticky,

Question

Quizplus · Accepted Answer

If the demand for labor decreases, there will be a surplus of labor at the current wage rate of $15. However, if wages are sticky, they will not decrease to eliminate the surplus. This will lead to an increase in unemployment as more workers are willing to work at the current wage rate of $15, but fewer job opportunities are available. Therefore, option B is the correct answer.

Suppose the Wage Rate in the Labor Market Is $15