Final answer:
D. the supply of labor increases and wages rise.
A decline in the labor force due to a pandemic typically leads to a decreased supply of labor, which theoretically causes wages to rise as employers compete for a smaller pool of job seekers.
Step-by-step explanation:
When millions of people leave the labor force due to a pandemic, the immediate effect is that the supply of labor decreases. This can lead to a scenario where there are fewer workers available to fill jobs. By basic economic principles, a decrease in labor supply should lead to wages rising. Employers may offer higher wages to attract a smaller pool of job seekers.
However, the overall effect on wages depends on other factors such as how employers perceive the duration of the labor shortage, their capacity to raise wages, and the state of the overall economy. The concept of 'sticky wages' implies that wages don't easily decrease when there's an excess supply of labor; likewise, they may not increase as expected when the supply of labor decreases. So, while theory suggests wages should increase, actual wage changes can depend on broader economic conditions and business expectations.