Author Question: The relative-wage explanation for the existence of downwardly sticky wages emphasizes (Read 64 times)

hbsimmons88 · **on:** Apr 19, 2019

Question 1

Suppose that airline workers are laid off during a recession because of an unspoken agreement between airline workers and airline executives that wages will not be reduced. This example is consistent with the

◦ relative-wage explanation of unemployment.
◦ explicit contract explanation of unemployment.
◦ implicit contract explanation of unemployment.
◦ efficiency wage explanation of unemployment.

Question 2

The relative-wage explanation for the existence of downwardly sticky wages emphasizes

◦ unspoken agreements between workers and firms that firms will not cut wages.
◦ the incentive that firms may have to hold wages above the market clearing rate.
◦ employment contracts that stipulate workers' wages, usually for a period of one to three years.
◦ the contention that workers in one industry may be unwilling to accept a wage cut, unless they know that workers in other firms and industries are receiving similar cuts.

janeli1 · **Reply #1 on:** Apr 19, 2019

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