ployers believe that they are not legally able to reduce wages. en during severe recessions, most workers are able to keep their jobs, and so would rather see a few of their fellow workers laid off an take a pay cut themselves. ployers are fearful of renegotiating contracts because of threats from union officials. major policy implication of this phenomenon? en the economy is experiencing a contraction, it causes the aggregate supply curve to shift to the right, returning the economy to tential output on its own. en the economy is experiencing a contraction, it tends to require an increase in aggregate demand to return to potential output.

ployers believe that they are not legally able to reduce wages. en during severe recessions, most workers are able to keep their jobs, and so would rather see a few of their fellow workers laid off an take a pay cut themselves. ployers are fearful of renegotiating contracts because of threats from union officials. major policy implication of this phenomenon? en the economy is experiencing a contraction, it causes the aggregate supply curve to shift to the right, returning the economy to tential output on its own. en the economy is experiencing a contraction, it tends to require an increase in aggregate demand to return to potential output.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter21: Unemployment

Section: Chapter Questions

Problem 35CTQ: While unemployment is highly negatively correlated with the level of economic activity, in the real...

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