Answer to Question #221187 in Macroeconomics for Nthabiseng Mphuthi

Question

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

Answer 1

Incase the rate of unemployment goes up, it is likely to be hard for individuals to find employment at other firms. This makes the workers bargaining power to fall, and the nominal wage to fall to.

While in cases where unemployment reduces there will be increase in bargaining power and increase in nominal wage.