All else equal, an increase in the productivity of workers in the economy will lead to _____ in the quantity of labor hired and _____ in the wage rate.
A) an increase; an increase
B) a decrease; an increase
C) an increase; a decrease
D) a decrease; a decrease

Question

Quizplus · Accepted Answer

An increase in the productivity of workers makes them more valuable to employers, leading to both an increase in the quantity of labor hired (as firms want to produce more using the more productive labor) and an increase in the wage rate (as the demand for labor goes up, wages rise to attract and retain the more productive workers).

All Else Equal, an Increase in the Productivity of Workers