The figure below shows the relationship between an economy's output and employment.

-Refer to the figure above.If the economy is currently on F₂ and produces Y₃ level of output,a leftward shift of the labor demand curve with no change in productivity will cause output to ________.
A) decline from Y₃ to Y₁
B) decline from Y₃ to Y₂
C) increase from Y₃ to Y₅
D) increase from Y₃ to Y₄

Question

The figure below shows the relationship between an economy's output and employment.
 
-Refer to the figure above.If the economy is currently on F₂ and produces Y₃ level of output,a leftward shift of the labor demand curve with no change in productivity will cause output to ________.
A) decline from Y₃ to Y₁ 
B) decline from Y₃ to Y₂ 
C) increase from Y₃ to Y₅ 
D) increase from Y₃ to Y₄

Quizplus · Accepted Answer

A leftward shift of the labor demand curve will result in a decrease in employment and hence a decrease in output. As a result, the economy will move from F₂ to a point on the new labor demand curve, such as F₁, and produce output at Y₂ level. Therefore, the correct option is B.

The Figure Below Shows the Relationship Between an Economy's Output