If the Efficiency Wage Theory Holds

question 109

Multiple Choice

If the efficiency wage theory holds,

• A) wage rigidity that perpetuates a recessionary gap is transformed from a temporary phenomenon to a permanent feature.
• B) self-correction will automatically eliminate a recessionary gap.
• C) increases in real wages will be required to eliminate a recessionary gap.
• D) increases in nominal wages will be required to close a recessionary gap.

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Definitions:

Detrimental Reliance

A legal term describing a situation where an individual suffers harm by relying on a promise or representation made by another.

Rescind

To revoke, cancel, or repeal a contract, agreement, or order.

Estimate of Value

An approximation of something's worth, determined through analysis or professional appraisal techniques.

Nondisclosure

The act of withholding information or not communicating certain information, often to protect confidentiality or trade secrets.