In the classical macroeconomic model,a decrease in the real wage would cause
A)a decrease in the marginal product of labor and an increase in the quantity demanded for labor.
B)an increase in the marginal product of labor and an increase in the quantity demanded for labor.
C)no change in the quantity demanded for labor.
D)an increase in both the supply of and demand for labor.

Question

Quizplus · Accepted Answer

A decrease in the real wage would lead to an increase in the quantity demanded for labor because firms would find it cheaper to hire more workers. However, as more labor is employed, the marginal product of labor (the additional output produced by an additional unit of labor) typically decreases due to the law of diminishing returns.

In the Classical Macroeconomic Model,a Decrease in the Real Wage