If Wages Are Sticky Downward, Then a Decrease in the Demand

question 165

Multiple Choice

If wages are sticky downward, then a decrease in the demand for labor

• A) will bring the economy back to full employment.
• B) will cause more unemployment in the short run.
• C) will cause an increase in production in the short run.
• D) will cause wages to drop in the short run.

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Definitions:

Debt Financing

Raising capital through the borrowing of funds to be paid back at a later date, typically with interest.

Static Theory

A theory that assumes that certain economic factors remain constant over time in economic modeling or analysis.

Marginal Tax Rate

The rate at which the last dollar of a person’s income is taxed, reflecting the percentage of additional income that is taken in taxes.

Financial Distress

A situation where a company or individual cannot generate enough revenue or income to cover operating expenses or financial obligations.