The number of unpaid internships is more likely to rise in an economy when the economy is in a recessionary gap and wage rates are constant than when wage rates are falling.

Question

Quizplus · Accepted Answer

A recessionary gap implies high unemployment and a lack of demand for labor. This can lead to an increase in unpaid internships as companies look for ways to cut costs and obtain free labor. Constant wage rates mean that businesses cannot reduce their labor costs by lowering wages, which can make unpaid internships a more attractive option. On the other hand, when wage rates are falling, businesses may be able to reduce their labor costs by paying lower wages, making unpaid internships less necessary.

The Number of Unpaid Internships Is More Likely to Rise