Question

Maria Tivlinsky and Harry​ Davis, both interns at an economics research institute in the country​ Southville, are discussing the effects of the increase in the supply of unskilled labor in the economy. Maria says that the average nominal wage paid to unskilled labor is likely to fall.​ This, according to​ her, would cause firms to hire more workers and will reduce unemployment in the country. Harry​ , however, does not think that unemployment will necessarily​ fall; too many workers looking for jobs could depress wages and employment prospects on the whole.
Which of the​ following, if​ true, is likely to weaken​ Harry's claim that unemployment will not​ fall?

A. Labor union membership in Southville stands at around 40 percent of the unskilled labor force.
B. The market for skilled workers in Southville is highly competitive.
C. Unskilled workers form a large proportion of the labor force.
D. The economy is expanding rapidly as a result of which the demand for labor is expected to increase sharply.
E. The recently revamped tax code in Southville has lowered income taxes for the lower-income workers.

Answer 1

The economy is expanding rapidly as a result of which the demand for labor is expected to increase sharply.

This statement is likely to weaken​ Harry's claim that unemployment will not​ fall

Explanation:

Nominal earnings are unlikely to decline because the rise in labour supply meets increasing labour demand.

The repeated improvement in marginal pay is not solely due to increased US Congress kindness. As you already know, rates and wages have been rising over time, which is what we call inflation.

The wage nominal is the currency assessed compensation (US dollars). The actual pay in an economy adjusted to transition in buying capacity is the nominal wage.