As the result of a decrease in capital, the demand for labor would ________, the supply of labor would ________, and the real wage would ________.

Question

Quizplus · Accepted Answer

When there is a decrease in capital, firms will have to reduce their production and operations which will lead to a decrease in demand for labor. However, the decrease in demand for labor will also lead to a decrease in the real wage rate since fewer workers will be needed to produce fewer goods and services. The supply of labor, on the other hand, will remain the same as the number of workers in the labor force will not be affected by the change in capital. Therefore, the correct answer is B as it correctly reflects the impact of a decrease in capital on the labor market.

As the Result of a Decrease in Capital, the Demand