When the unemployment rate is on the horizontal axis and the real wage is on the vertical axis,a reduction in productivity will cause which of the following to occur?
A)the wage-setting and price-setting curves will both shift downward.
B)the wage-setting and price-setting curves will both shift upward.
C)the price-setting curve to shift downward,and no shift in the wage-setting curve.
D)the wage-setting curve to shift upward,and the price-setting curve to shift downward.
E)the wage-setting curve to shift downward,and the price-setting curve to shift upward.

Question

Quizplus · Accepted Answer

A reduction in productivity decreases the ability of firms to pay high wages, shifting both the wage-setting and price-setting curves downward.

When the Unemployment Rate Is on the Horizontal Axis and the Real