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In: Economics

What are the implications of wages being "sticky downward"? (check all that apply) a. Employers will...

What are the implications of wages being "sticky downward"? (check all that apply)

a. Employers will lay off workers rather than cut wage rates

b. Disequilibrium can persist in labor markets

c. The aggregate supply curve will not fall enough to bring the economy back to potential GDP

d. A recessionary equilibrium can persist

Solutions

Expert Solution

a, b, c, and d

(All the statements are true. As wages decrease slowly, so employers will lay off workers than decreasing the wages. Also, disequilibrium will exist in labor market. As wages can not fall so, AS will not fall enough to bring economy to potential GDP and recessionary outcome will persist.)

Rahul Sunny answered 2 years ago
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