In the real intertemporal model,an adverse sectoral shock acts to
A) shift the output demand curve to the left, and the labor supply curve to the left.
B) shift the labor demand and labor supply curves to the left.
C) shift the labor demand curve to the right, and the labor demand curve to the left.
D) shift the output supply curve to the right.

Question

Quizplus · Accepted Answer

In the real intertemporal model, an adverse sectoral shock affects the productivity or demand of a specific sector, causing a leftward shift in the labor demand curve for workers in that sector. This results in fewer workers being employed in that sector at a lower equilibrium wage rate, leading to an overall leftward shift in the labor supply curve. As a result, both the labor demand and labor supply curves shift to the left, as in choice B.

In the Real Intertemporal Model,an Adverse Sectoral Shock Acts to