What are the short-run economic effects when u. s. firms substitute labor outside of the u. s. for labor inside the u. s.? a. the wage rate in the u. s. will decrease, and the wage rate in the foreign country will increase. b. the wage rate in the u. s. will increase, and the wage rate in the foreign country will decrease. c. the wage rate in the u. s. will decrease, and the wage rate in the foreign country will decrease. d. the wage rate in the u. s. will remain the same, and the wage rate in the foreign country will decrease.

a. The wage rate in the U.S. will decrease, and the wage rate in the foreign country will increase.

Explanation:

Estimates has shown that immigration has reduced the wages of low-skilled workers and college graduates. And this implies that the influx of immigrant workers from 1990 to 2006 reduced the wages of low-skilled workers by 4.7 percent and college graduates by 1.7 percent. However, other estimates that examine immigration within a different economic framework find that immigration raises the wages of all U.S. workers, regardless of the immigrants’ level of education.

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