How do labor unions affect the economy?

Question

A. They decrease demand by opposing low prices
B. They increase supply by keeping workers healthy
C. They decrease supply by increasing worker wages
D. They increase demand by ensuring ethical production

Answer 1

The most accurate answer from the options provided is:

C. They decrease supply by increasing worker wages.

Labor unions often negotiate for higher wages and better working conditions for their members. While higher wages can lead to improved living standards for workers, they can also increase the overall cost of labor for businesses. This may lead to a decrease in supply if businesses hire fewer workers or reduce hours to manage costs, or if they pass on increased labor costs to consumers through higher prices.

However, it's worth noting that unions can also have positive effects on demand through increased worker spending power, but in this context, option C is the best fit regarding the immediate economic effect of increased wages.