The Efficiency Wage Model Can Be Modified to Allow Real

question 69

Multiple Choice

The efficiency wage model can be modified to allow real wages to vary over the business cycle by assuming that

• A)workers' effort may depend on the unemployment rate and the real wage.
• B)during a recession, labor supply will decrease, reducing the efficiency wage.
• C)during a recession, productivity will fall, causing a reduction in the efficiency wage.
• D)during a boom, labor demand will increase, causing the efficiency wage to rise.

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Definitions:

Consideration

The value (such as money, service, or goods) promised to another when making a contract.

Binding Contract

A legally enforceable agreement between two or more parties that is binding in a court of law.

Co-Worker

An individual who works with another in the same organization or on the same project, but not necessarily having the same rank.

One-Sided Agreement

A contract where the terms and conditions are favorable to one party, often at the expense of the other party.