Chapter 11- Keynesian Model
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4 Terms
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What is real-wage rigidity?
This is a concept of the fact that the real wages adjusts too slowly to keep the quantity of labor demanded equal to the labor supplied.
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Why are institutional and legal factors contributors to real wage rigidity?
This could be through a minimum wage is set higher than the market clearing wage or union contracts that set a wage rate.
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What are turnover costs?
These are the costs associated with existing workers or hiring and training new workers.
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How do turnover costs contribute to real wage rigidity?
Firms will pay a higher real wage to reduce turnover costs- they will pay productive workers as opposed to hiring new employees.