Productivity growth is a factor affecting the natural rate of unemployment because
A) increases in productivity results in higher unemployment.
B) a slowdown in productivity growth is not always immediately accompanied by a slowdown in real . wage growth, so unemployment rises.
C) a slowdown in productivity growth means that more workers are need, so the unemployment decreases.
D) productivity growth results in lower wages.

Question

Quizplus · Accepted Answer

A slowdown in productivity growth can lead to a situation where real wages do not adjust downwards quickly enough to reflect the reduced productivity, leading to higher unemployment rates as businesses cannot afford to keep all workers employed at the previous wage levels.

Productivity Growth Is a Factor Affecting the Natural Rate of Unemployment