When there is a temporary increase in total factor productivity,
A) labour demand increases and output supply decreases.
B) labour demand decreases and output demand increases.
C) labour demand increases and output demand increases.
D) labour demand decreases and output supply decreases.
E) labour demand increases and output supply increases.

Question

Quizplus · Accepted Answer

A temporary increase in total factor productivity makes labor more productive, leading to an increase in labor demand and an increase in output supply as firms can produce more efficiently.

When There Is a Temporary Increase in Total Factor Productivity