If a real shock causes a particular sector of the economy to decline,associated labor adjustment costs will _____ the effect of the initial shock.
A) amplify
B) dampen
C) not influence
D) eliminate

Question

Quizplus · Accepted Answer

Labor adjustment costs refer to the costs incurred by workers in finding new employment and retraining for new skills after a shock leads to the decline of a particular sector. These costs can cause the decline to have a multiplying effect on the economy, leading to a greater decline in overall economic activity. Therefore, the labor adjustment costs will amplify the effect of the initial shock.

If a Real Shock Causes a Particular Sector of the Economy