Many economists have argued that labor market regulations in the European Union have stifled efficiency and held down potential GDP. If this argument is correct, the removal of these regulations should:
A)shift the short-run aggregate supply curve in to the left.
B)shift the long-run aggregate supply curve out to the right.
C)shift the aggregate demand curve out to the right.
D)not affect the aggregate supply or aggregate demand curves.

Question

Quizplus · Accepted Answer

Removing labor market regulations would likely make the labor market more efficient, increasing the productive capacity of the economy. This would be represented by a shift of the long-run aggregate supply curve to the right, indicating an increase in potential output.

Many Economists Have Argued That Labor Market Regulations in the European