Economic Theory Suggests That, During a Recession, When Unemployment Is

question 27

Multiple Choice

Economic theory suggests that, during a recession, when unemployment is above the natural rate,

• A) employers should be able to negotiate wage concessions and keep marginal plants in operation.
• B) job seekers should lower their wage demands a little since jobs are hard to find.
• C) firms should hire aggressively when job seekers are numerous and jobs easy to fill.
• D) both workers and firms have strong incentives to reduce excess unemployment.
• E) all of the above.

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Definitions:

Level of Risk

The level of risk and possible monetary loss associated with making an investment choice.

Weighted Average Cost

A measure that calculates the average cost of goods available for sale, considering the weight of each unit's cost.

Cost of Equity

The rate of return that a company is expected to pay out to its shareholders for their investment in the company, factoring in the risk of the investment.

Cost of Preferred

This refers to the required return on investment for preferred stock, representing the cost to a company for issuing such stock.