Question

An economy is operating at full employment, and then workers in the bread industry are laid off, but not hired by the wine industry. This change is portrayed in the movement from:

Answer 1

Answer:

D) C to F

Explanation:

In points A, B, C and D, the economy is at full employment. Some workers produce wine, others bread. Points F and G represent a situation where the economy has different unemployment levels. While point E shows an economy producing over its full employment potential. Full employment in an economy is reached when the unemployment level is between 4-5% approximately, frictional unemployment always exists.

Since the question states that the economy was at full employment, but then unemployment increased, the initial point must be A, B, C or D, and the ending point must be F or G. The only option that fits is D, point C to F.