Question

When wages exhibit downward and a recession occurs, the decline in employment will be ____________.a. because of the decline in labor demand is absorbed by a fall in wages. b..

Answer 1

When wages exhibit downward and a recession occurs, the decline in employment will be smaller than what would occur if wages were rigid, smaller when the supply of labor is relatively inelastic and softened because some of the declines in labor demand are absorbed by a fall in wages.

A prolonged period of weak or negative real GDP (output) growth that is accompanied by a noticeably higher unemployment rate is known as a recession. During a recession, a lot of other economic activity indices are similarly weak. For instance, corporate investment and consumer consumption are typically low. Additionally, both the number of enterprises that close and the number of families and businesses that are unable to repay debts is unusually high. The unemployment rate is regarded as a trustworthy and timely summary indicator of a variety of detrimental changes in an economy because these signs are often present when there is a considerable increase in the jobless rate.

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