Suppose that the overall U.S. labor supply and demand can be depicted using the graph below. For simplicity, assume that all workers receive the same wage. The initial equilibrium wage is $30 per hour. Use the graph below to answer the following questions. 

a) Suppose that there is a recession so that the demand for labor drops. Depict the consequences of this change using the graph below. If the wage can adjust, how would the wage change? How would the number of workers willing to work change? 

Wage,
Labor supply
$40
$30
$20
Labor demand
$10
Millions of worker
100
150
200b) Suppose that the wage could not change. (This could be because of contracts, inability of firms to react quickly, or worker resistance to a falling wage.) Depict the recession’s consequences with fixed wages. How would the number of workers willing to work change? Show the number of unemployed workers on your graph. 

Wage,
Labor supply
$40
$30
Labor demand
$20
$10
Millions of worker
100
150
200

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