The U.S. employment-to-population ratio peaked in 2000 and in 2012 fell to 58 percent, a level not seen since the early 1980s. This fall in the employment-to-population ratio ________ the equilibrium quantity of labor and ________ potential GDP.

Question

Quizplus · Accepted Answer

A fall in the employment-to-population ratio means there are fewer people working relative to the population size. This implies a decrease in the equilibrium quantity of labor, which in turn decreases potential GDP (as potential GDP depends on the level of labor, capital, and productivity). Therefore, the correct answer is D – a decrease in the employment-to-population ratio decreases both the equilibrium quantity of labor and potential GDP.

The US Employment-To-Population Ratio Peaked in 2000 and in 2012 Fell