Refer to the figure above. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from:

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Question restatement: The scenario describes an economy at full employment, followed by layoffs in the bread industry. The task is to identify the movement depicted in the figure as C to F.

Option analysis without visible choices: The provided data does not list the other answer options, only the implied correct choice 'C to F'. In a typical macro diagram for an economy at full employment, a negative shock (such as layoffs in a specific industry) tends to reduce overall employment and output in the short run, creating a recessionary tendency. How this shows up depends on the diagram type:

- If the figure is an aggregate demand–aggregate supply (AD–AS) diagram, a negative supply-side shock (like widespread layoffs in a key industry) often shifts the short-run aggregate supply (SRAS) left, resulting in higher price levels and lower real GDP. The movement would generally represent a decline in output along with a rise in prices, i.e., a transition from higher to lower real GDP with inflationary pressure.
- If the figure is a production possibilities frontier (PPF) or a related production diagram, a reduction in labor in one sector could move the economy from a more productive allocation to a less productive point, reducing potential output in the short run, possibly represented by a shift or a move along the curve depending on the exact axes and curves shown.
- If the diagram shows a business-cycle or macro equilibrium path, the drop in employment in one industry would typically correspond to a move toward a point of lower overall output and higher unemployment, i.e., a recessionary movement.

Why the correct choice fits a recessionary or negative-output move: A layoff in a major employment sector reduces total employment and measured output in the short term, which is characteristic of a contractionary (recessionary) phase. In many labeled diagrams, such a shock would be illustrated as a move from a high-output/full-employment point toward a lower-output point.

Why other hypothetical choices (in generic terms) would be incorrect:
- A move that indicates higher output or full employment after the shock would be inconsistent with layoffs in a key industry, which depresses production and employment.
- A move representing only a change in price level without a change in output would imply a pure demand-side or price-only distortion, not a labor-reallocation shock in production.
- A move that signifies a long-run growth adjustment without unemployment implies the shock has no persistent effect on the economy’s capacity, which contradicts the immediate impact of layoffs reducing actual output.

In summary, given a negative event in a major labor-intensive sector, the expected diagonal or curved path on typical macro diagrams shows reduced real GDP (output) and higher unemployment, i.e., a contractionary movement. The identified movement 'C to F' is thus interpreted as the diagram’s representation of that recessionary shift, aligning with the concept that a sector-specific layoff reduces overall economic activity in the short run.

ECON&201 15109 Ch. 2 Assignment

Refer to the figure above. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from:

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