Referring to the above figure, consider an inflow of half a million immigrant workers who are all looking for employment. Which of the following statements is correct?
Understand the Problem
The question is asking about the economic impact of an inflow of immigrant workers on the wage-setting curve depicted in the provided figure. It seeks to determine which of the listed statements is true based on economic theory relating to labor supply and wages.
Answer
The wage-setting curve temporarily shifts down.
The wage-setting curve temporarily shifts down.
Answer for screen readers
The wage-setting curve temporarily shifts down.
More Information
An influx of workers increases labor supply, leading to downward pressure on wages. The wage-setting curve shifts to adjust for the additional workers, as competition for jobs increases and initial wages offered may decrease.
Tips
A common mistake is to assume all immigrants will find work immediately, which is often not the case due to matching frictions in the job market.
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