Scenario: Tree Country has a population of 18,000 people, of whom two-thirds are part of the workforce. The country's only asset is wood, where K = 18,000. The country only produces wooden furniture. In the figure below, Y stands for GDP, and H equals efficiency units of labor.

-Refer to the scenario above.Which of the following is likely to reduce the total efficiency units of labor in Tree Country?
A) A global recession that lowers aggregate demand
B) A decrease in the price of capital
C) A loss of technology used in production
D) An earthquake that kills a number of people

Question

Scenario: Tree Country has a population of 18,000 people, of whom two-thirds are part of the workforce. The country's only asset is wood, where K = 18,000. The country only produces wooden furniture. In the figure below, Y stands for GDP, and H equals efficiency units of labor.
 
-Refer to the scenario above.Which of the following is likely to reduce the total efficiency units of labor in Tree Country?
A) A global recession that lowers aggregate demand 
B) A decrease in the price of capital 
C) A loss of technology used in production 
D) An earthquake that kills a number of people

Quizplus · Accepted Answer

An earthquake that kills a number of people will reduce the total population of Tree Country, which will directly decrease the total efficiency units of labor, as H (efficiency units of labor) is a function of the total workforce. A decrease in population means fewer people available to work and produce goods, thereby reducing the efficiency units of labor.

Scenario: Tree Country Has a Population of 18,000 People, of Whom