Refer to the information provided in Figure 13.4 below to answer the questions that follow. Figure 13.4
-Refer to Figure 13.4. The demand for labor rises from D' to D. If firms had entered into explicit contracts with workers that set wages for 3 years, then the wage rate will ________ and employment will ________.

Question

Refer to the information provided in Figure 13.4 below to answer the questions that follow.  Figure 13.4
-Refer to Figure 13.4. The demand for labor rises from D' to D. If firms had entered into explicit contracts with workers that set wages for 3 years, then the wage rate will ________ and employment will ________.

Quizplus · Accepted Answer

With explicit contracts fixing wages for 3 years, the wage rate would not adjust immediately to market changes, so it would remain at the initially contracted rate. The increase in demand for labor would lead to an increase in employment, as firms seek to hire more workers at the existing wage rate.

Refer to the Information Provided in Figure 13