If wage rigidity holds the real wage above the equilibrium level, an increase in the supply of...

Question:

If wage rigidity holds the real wage above the equilibrium level, an increase in the supply of labor will _____ the number unemployed.

a) increase,

b) decrease,

c) not change,

d) possibly increase, decrease, or leave unchanged.

Labor Market:

Like all markets for goods or services, the Labor Market is subject to the laws of supply and demand. The Labor Market's supply represents the jobs available at firms and governments, whereas the demand refers to the number of people willing and capable to work.

Answer and Explanation: 1

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The correct answer is a) increase.

  • Because wage rigidity will make the real wage (i.e. the price) greater than the equilibrium price in the labor...

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The Labor Market in Economics

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Chapter 8 / Lesson 4
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In economics, labor is subject to the laws of supply and demand. Learn about the labor market in economics. Explore scarcity in labor, review why CEOs make more money than teachers, and examine the impact of market forces on the labor market.


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