Women are Leaving the Workforce at Alarming Rates

EconEye Admin

12 months ago

Rising childcare costs and overwhelming work demands have forced many women, including executives, to leave their jobs to focus on family and self-care—a trend that risks stifling U.S. economic growth. An estimated 455,000 women left the workforce between January and August this year.—cnn.com

Answer the following questions to check your understanding of the story.

When women leave the labor force, how does potential GDP change?

a) Potential GDP doesn’t change but real GDP decreases because the supply of labor decreases.

b) Potential GDP decreases because the supply of labor decreases.

c) Potential GDP decreases because the demand for labor decreases.

d) Potential GDP increases because the demand for labor increases.

Wrong! - If women leave their jobs, does the demand for labor change? What happens to full-employment quantity of labor and potential GDP?

Good Job! - Potential GDP is real GDP produced by the full-employment quantity of labor. As women leave their jobs, the supply of labor decreases, which decreases the full-employment quantity of labor and potential GDP.

Consider all the factors that influence the standard of living. When women leave the labor force, how does the standard of living change?

a) The standard of living decreases because the value of household production increases by less than real GDP decreases.

b) The standard of living increases because the value of household production increases by more than real GDP decreases.

c) The standard of living doesn’t change because the value of household production increases by the same amount as real GDP decreases.

d) We don’t know. It depends on whether the increase in the value of household production is greater or smaller than the amount by which real GDP decreases.

Wrong! - The standard of living is influenced by several factors including real GDP and the value of household production. When women leave the labor force, how does the value of household production change? How does the real GDP change? Think about diminishing returns to labor.

Correct! - The standard of living is influenced by several factors including real GDP and the value of household production. Because of diminishing returns to labor, when women leave the labor force, the increase in the value of household production is greater than the decrease in real GDP, and the standard of living increases.

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