Suppose that due to an increase in the price of steel, Chrysler had to raise prices on its automobiles, and as a result its sales declined. Due to the decline in sales, Chrysler chose to lay off some employees rather than cut employee wages because of an unspoken agreement between its employees and Chrysler executives that wages would not be reduced. This example is consistent with the

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Quizplus · Accepted Answer

The scenario presented in the question is consistent with the implicit contract explanation of unemployment. This is because there seems to be an unspoken agreement between employees and the company regarding wages, which is why layoffs were chosen instead of wage cuts. This type of implicit contract between employees and employers can lead to higher unemployment in certain situations, such as when the company is facing economic challenges.

Suppose That Due to an Increase in the Price of Steel