Suppose That a Labor Market Were Initially in Equilibrium and Wages

question 28

Multiple Choice

Suppose that a labor market were initially in equilibrium and wages and prices were perfectly flexible. If nominal wages and prices were to increase by 10 percent in response to a change in the money supply, then

• A) equilibrium employment would immediately fall in response to the new, lower real wage rate.
• B) equilibrium employment would immediately increase in response to the new, higher nominal wage.
• C) equilibrium employment would remain at the original level despite uncertain short-term variability in the real wage.
• D) equilibrium employment would immediately fall in response to the price effect despite a constant real wage.
• E) equilibrium would remain at the original level because no change in the real wage would occur.

---

Definitions:

Onshoring

The practice of transferring a business operation that was moved overseas back to the country from which it was originally relocated.

Gigster's Business Model

A digital platform business model that connects companies with freelance software developers and designers to work on projects, leveraging a gig economy structure.

Experienced IT Professionals

Experienced IT Professionals are individuals with a significant amount of knowledge and skills in information technology, gained through years of work in the field.

Entrepreneurs

Individuals who conceive new business ideas, take financial risks to start businesses, and drive innovation and economic growth.