If productivity constantly increases,then the real wage rate ________ and employment ________.
A) constantly rises; constantly increases
B) does not change; constantly decreases
C) constantly decreases; does not change
D) constantly rises; does not change

Question

Quizplus · Accepted Answer

If productivity constantly increases, it means that workers are producing more output per hour worked. This allows firms to pay higher wages while also remaining cost-competitive. Therefore, the real wage rate (i.e. the wage adjusted for inflation) will constantly rise. Additionally, as firms become more productive, they are able to expand output and this creates more employment opportunities, leading to employment constantly increasing.

If Productivity Constantly Increases,then the Real Wage Rate ________ and Employment