Answer to Question #221206 in Macroeconomics for NTHABI

Question

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

Answer 1

An increase in the rate of unemployment makes it hard for workers to get employment at other firms. Consquently, the bargaining power of workers' falls. AS a result of decrease in the workers' gargaining power, the nominal wage decreases.