An adverse supply shock shifts the production function curve ________ and the labor demand curve ________.
A)upward,upward
B)upward,downward
C)downward,upward
D)downward,downward

Question

Quizplus · Accepted Answer

An adverse supply shock shifts the production function curve downward because it reduces the output that can be produced with a given amount of inputs. It shifts the labor demand curve downward as well because firms will demand less labor due to the decreased productivity of inputs.

An Adverse Supply Shock Shifts the Production Function Curve ________