When unemployment is high,in the short run,nominal wages will:
A) be flexible.
B) be inflexible.
C) not be affected.
D) be contracted at the minimum wage.

Question

Quizplus · Accepted Answer

When unemployment is high, there are more workers seeking jobs than there are available jobs. This puts downward pressure on wages. However, if nominal wages were flexible, they would decrease to clear the labor market. In reality, nominal wages are often inflexible, meaning they don't adjust downwards as much as they could or should. This can lead to a situation where labor demand remains low, creating a long-term unemployment problem.

When Unemployment Is High,in the Short Run,nominal Wages Will