Answer to Question #220728 in Macroeconomics for Swazibear

Question

in the labour market explain how the rate of unemployment is related to the bargaining power and nominal wages

Answer 1

In the labor market, when the rate of unemployment increases, it is more difficult for people to find employment at other firms. As a result, workers' bargaining power will fall. The nominal wage will fall as the bargaining power falls.

When the rate of unemployment decreases, it will be much easier for individuals to find employed at other firms. As a result, workers' bargaining power will rise. The nominal wage will rise as the bargaining power rises.