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

Question

Quizplus · Accepted Answer

A temporary increase in total factor productivity makes production more efficient, leading to an increase in the demand for labor as firms want to produce more. Additionally, the supply of output increases because firms can produce more goods or services with the same amount of inputs.

When There Is a Temporary Increase in Total Factor Productivity