Question

If there is unemployment, the average wage rate will decline as the unemployed workers choose lower wages rather than going without a job. The demand curve for labor slopes downward and to the right so that more workers would be hired at the lower wage rate, restoring full employment.
1. According to the Keynesian view, this quote is __________.
a.incorrect because widespread unemployment would cause wages to rise, not decline.
b.incorrect because the demand for labor, other things constant, will not be negatively related to wages.
c.incorrect because wages and prices tend to be highly inflexible downward.
d.essentially correct.

Answer 1

Answer:

The correct answer is c. incorrect because wages and prices tend to be highly inflexible downward.

Explanation:

When there is unemployment the demand curve slopes downwards but wages and prices are inflexible downwards. The above statement is therefore incorrect because the wages and prices are highly inflexible and the workers may not be willing to work for a lower pay. This is highly dynamic and depends on the workers choices and needs.