Reference no: EM133128719
Needing 100 word response
What is wage rigidity and how does it affect markets and performance? Wages cannot be adjusted downwards, which has significant implications for labor market performance. If wages exceed the market value rigidly downwards and don't adjust in order to equilibrate supply and demand, involuntary unemployment can arise. (Goette.L, Sundae U., & Sundae U., 2007). It is essentially the failure of market prices to change quickly.
Do you agree with Keynes' assessment that wage-price rigidity requires the government's involvement in the markets? On this theory, I'm 50/50 that the government should be involved in the pricing of products.
(Pro) Government involvement could regulate prices during natural disasters like hurricanes and other natural and economic disasters. Why do I defend this statement? I witnessed gas prices rise from $2.70 per gallon to $3.80 per gallon, or a gallon of milk went up $2.00, purely as a result of the hurricane.
(Disadvantage) Why should the government not regulate prices? It could result in an influx of goods and uncontrollable supply and demand, as well as sales with no limits and zero restrictions. Markets could crash and not be able to quickly adjust prices to the supply and demand ratio.(Blinder and Zandi 2007).
In my opinion, the government should keep an eye on prices but not at the point where they have 100% control of production and sales so that they can control stocks, investments, and commodities.
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