Figure 7.1

-Refer to Figure 7.1 . Start from initial equilibrium. If firms reduce their capital stock, the new real wage could be ________ and the new amount of labor employed could be ________.

Question

Figure 7.1
 
-Refer to Figure 7.1 . Start from initial equilibrium. If firms reduce their capital stock, the new real wage could be ________ and the new amount of labor employed could be ________.

Quizplus · Accepted Answer

When firms reduce their capital stock, the demand for labor decreases because less capital requires less labor to be productive. This shift results in a lower real wage (X) and a lower amount of labor employed (A).

Figure 7.1 -Refer to Figure 7.1 . Start from Initial Equilibrium. If