The figure below shows the labor demand and labor supply curves for an economy.

-Refer to the figure above.The economy is currently at E.Which of the following is likely to happen if a recession hits the economy,assuming that there is downward rigidity of wages?
A) The labor market equilibrium will move from point E to point G.
B) The labor market equilibrium will move from point E to point H.
C) The labor market equilibrium will move from point E to point D.
D) The labor market equilibrium will move from point E to point F.

Question

The figure below shows the labor demand and labor supply curves for an economy.
 
-Refer to the figure above.The economy is currently at E.Which of the following is likely to happen if a recession hits the economy,assuming that there is downward rigidity of wages?
A) The labor market equilibrium will move from point E to point G. 
B) The labor market equilibrium will move from point E to point H. 
C) The labor market equilibrium will move from point E to point D. 
D) The labor market equilibrium will move from point E to point F.

Quizplus · Accepted Answer

With downward rigidity of wages, a recession will lead to a decrease in demand for labor, causing a movement along the supply curve to a lower equilibrium point.

The Figure Below Shows the Labor Demand and Labor Supply