Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to
A) a wealth effect.
B) a multiplier effect.
C) an increase in aggregate supply.
D) a price level that is inﬂexible downward.

Question

Quizplus · Accepted Answer

Collective bargaining agreements that prohibit wage cuts for the duration of the contract contribute to a price level that is inﬂexible downward. This means that wages cannot be reduced even if there is a decrease in demand for labor or a decrease in the overall economic activity, which could result in higher unemployment or other negative effects on the economy. This can lead to an increase in prices and a decrease in competitiveness, which can be harmful to the economy in the long run.

Collective Bargaining Agreements That Prohibit Wage Cuts for the Duration