Unemployment Tends to Go Up When Aggregate Demand Falls Mainly

question 12

Multiple Choice

Unemployment tends to go up when aggregate demand falls mainly because

• A) when wages fall, workers seek alternative employment.
• B) unions renegotiate for lower wages, making it difficult for job searchers to find suitable jobs.
• C) wage rates then to be downward rigid.
• D) most human capital is general and not firm-specific.

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Definitions:

Price

The financial sum needed for the purchase of a product or service.

Marginal Product

The change in output resulting from employing one more unit of a specific input, keeping all other inputs constant.

Bricklayers

Expert craftsmen specialized in using bricks, blocks, and various building materials to build or mend walls, partitions, arches, and additional structural elements.

Equilibrium Market Wage

The equilibrium market wage is the wage rate at which the quantity of labor supplied equals the quantity of labor demanded in a given market.