A Look at Macroeconomic Data Across Countries Reveals That When

question 113

Multiple Choice

A look at macroeconomic data across countries reveals that when economies experience recessions, unemployment rates rise, but wages fall very little, if at all. Which of the following is most likely to support this observation?

• A) Wages are determined by the interaction of the forces of labor demand and supply.
• B) The demand for labor is derived demand and hence does not fall during recessions.
• C) The labor market usually exhibits perfect competition.
• D) The labor supply curve becomes perfectly inelastic during recessions.
• E) Long term labor contracts make the wage rates sticky downwards.

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