Refer to the following figure when answering the following questions.
Figure 15.1: The Labor Market
-Consider Figure 15.1, which is a representation of the labor market. In 2005, Hurricane Katrina hit the Gulf Coast of the United States; this would cause a shift from curve ________ because this is an example of a(n) ________.
A) increase in tax rates
B) increase in government spending
C) negative TFP shock
D) rise in exchange rates
E) None of these answers is correct.

Question

Refer to the following figure when answering the following questions.
Figure 15.1: The Labor Market 
-Consider Figure 15.1, which is a representation of the labor market. In 2005, Hurricane Katrina hit the Gulf Coast of the United States; this would cause a shift from curve ________ because this is an example of a(n) ________.
A) increase in tax rates 
B) increase in government spending 
C) negative TFP shock 
D) rise in exchange rates 
E) None of these answers is correct.

Quizplus · Accepted Answer

A negative TFP (Total Factor Productivity) shock represents a decrease in the efficiency with which labor and capital are used to produce output. Hurricane Katrina caused significant damage to infrastructure, businesses, and homes in the Gulf Coast region, leading to disruptions in production and a decrease in productivity in the affected areas. This would cause a shift from curve C to curve B in the labor market diagram, as shown in Figure 15.1. None of the other answer choices are applicable in this scenario.

Refer to the Following Figure When Answering the Following Questions