Sometimes Wages Are Set Above the Equilibrium Level When Firms

question 222

Multiple Choice

Sometimes wages are set above the equilibrium level when firms pay

• A)workers with more seniority higher wages than newly hired workers.
• B)efficiency wages to reduce turnover.
• C)compensating differentials to workers who work the night shift.
• D)more attractive salespeople higher wages than less attractive salespeople.

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Definitions:

Full Employment

A situation in an economy where all available labor resources are being used in the most efficient way, typically with only natural unemployment remaining.

Marginal Propensity

Measures the portion of additional income that an individual or entity spends on consuming goods rather than saving.

Multiplier

The ratio of the change in an endogenous variable to the change in an exogenous variable it is dependent on, often used in the context of fiscal policy’s effect on the economy.

MPC

Stands for Marginal Propensity to Consume, indicating the proportion of additional income that is spent on consumption.