Other things the same, an increase in wages above their equilibrium level
A)increases frictional unemployment but leaves the natural rate of unemployment unchanged.
B)increases frictional unemployment and increases the natural rate of unemployment.
C)increases structural unemployment but leaves the natural rate of unemployment unchanged.
D)increases structural unemployment and increases the natural rate of unemployment.

Question

Quizplus · Accepted Answer

An increase in wages above their equilibrium level can lead to structural unemployment because it creates a surplus of labor (more people willing to work at the higher wage than there are jobs available). This can increase the natural rate of unemployment, which includes structural unemployment.

Other Things the Same, an Increase in Wages Above Their