The demand for labor and other factors of production typically decline in a recession because those factors
A)Have become relatively scarcer than before the recession.
B)Are no longer offered for sale in factor markets.
C)Are derived from the demand for final output,which also declines in a recession.
D)Have become more expensive than before the recession.

Question

Quizplus · Accepted Answer

In a recession, there is a decline in the demand for final output, which leads to a decrease in the demand for labor and other factors of production. As the production of goods and services decreases, firms require less labor and other inputs to produce them. Thus, the demand for labor and other factors of production are derived from the demand for final output, which declines in a recession.

The Demand for Labor and Other Factors of Production Typically