-Refer to the above figure. Suppose the economy's initial equilibrium is represented by the intersection of LRAS₁and AD₁. Suppose there is a persistent reduction in labor force participation, which reduces total planned production at any given price level. The resulting change in the economy's long-run equilibrium position would be represented by a

Question

-Refer to the above figure. Suppose the economy's initial equilibrium is represented by the intersection of LRAS<sub>1 </sub>and AD<sub>1</sub>. Suppose there is a persistent reduction in labor force participation, which reduces total planned production at any given price level. The resulting change in the economy's long-run equilibrium position would be represented by a A) movement from A to C. B) movement from A to B. C) movement from B to C. D) movement from C to A.

Quizplus · Accepted Answer

A persistent reduction in labor force participation would decrease the long-run aggregate supply (LRAS), shifting it to the left. This would move the economy from point A to point C, indicating a new equilibrium with lower output.

-Refer to the Above Figure