Figure 13-2
-Refer to Figure 13-2.Ceteris paribus,a decrease in the labor force would be represented by a movement from
A)SRAS1 to SRAS2.
B)SRAS2 to SRAS1.
C)point A to point B.
D)point B to point A.

Question

Figure 13-2 
-Refer to Figure 13-2.Ceteris paribus,a decrease in the labor force would be represented by a movement from
A)SRAS1 to SRAS2. 
B)SRAS2 to SRAS1. 
C)point A to point B. 
D)point B to point A.

Quizplus · Accepted Answer

A decrease in the labor force would lead to a decrease in the economy's potential output, shifting the long-run aggregate supply (LRAS) curve to the left from LRAS1 to LRAS2. As a result, the short-run aggregate supply (SRAS) curve would shift to the left from SRAS1 to SRAS2, leading to a higher price level and lower real GDP. Therefore, the correct answer is B, as the movement from SRAS2 to SRAS1 reflects a decrease in the labor force.

Figure 13-2 -Refer to Figure 13-2.Ceteris Paribus,a Decrease in the Labor Force