Employers and workers can increase output and employment by agreeing to lower nominal wages. Reasons they do not do so include:

Select one:

a. they are operating under inflexible long-term contracts

b. negotiating additional short-term contracts is expensive and time consuming

c. the incentive to accept a lower wage is reduced by the prospect of receiving unemployment benefits

d. all of the above

Solutions

Expert Solution

Answer is D. All the above.

They may not get in new contracts because earlier contract may be for long term so that they have to complete earlier contract.

It may be expensive to make a new contract and it takes times to negotiate the contract.

If lower wage rate is given they will not receive unemployment benefits from government. So they are unwilling to accept lower wages.

Rahul Sunny answered 1 year ago

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