Efficiency Wages That Create Above-Equilibrium Wages Will Most Likely Result

question 127

Multiple Choice

Efficiency wages that create above-equilibrium wages will most likely result in which of the following:

• A)a shortage of labour and decreased unemployment of labour
• B)a shortage of labour and increased unemployment of labour
• C)a surplus of labour and decreased unemployment of labour
• D)a surplus of labour and increased unemployment of labour

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Definitions:

Multiplier Effect

The phenomenon where an initial increase in spending leads to a larger increase in income and consumption within the economy.

Net Exports

The value of a country's total exports minus its total imports, representing the net trade balance.

MPC

The Marginal Propensity to Consume, representing the proportion of any additional income that a consumer spends on goods and services, as opposed to saving it.

Crowding Out

The phenomenon where increased government spending leads to a reduction in private sector investment, due to higher interest rates or the consumption of financial resources.