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What is the effect of having a cap (ceiling) on the compensation being paid to the executive?
this is my test qn,
A) there will be a labour shortage
B) increase the employment rate.
a reason for your choice would be great help.
thank you!
2 Answers
- SDDLv 71 decade agoFavourite answer
If the cap is lower than the market rate, there will be a shortage. When you set the price of anything too low, there will be less quantity supplied than demanded.
- 1 decade ago
If looked at from another aspect, a cap on executive pay will increase the funds available to increase labour quantities. Looking at from another perspective, If more funds are available, this increase in capital can be used for investment, which according to the keynesian multiplier will reduce unemployment.
