(b) On a new diagram use a wage setting curve and a price setting curve to illustrate the change to the equilibrium level of employment if there is a reduction in the degree of competition faced by firms. Clearly state what will occur to the real wage and the level of unemployment. (c) Suppose the economy has low aggregate demand with high unemployment. Use a new wage setting curve and price setting curve diagram to explain how the economy could automatically adjust back to equilibrium. Would this occur in reality? Justify your answer.

(b) On a new diagram use a wage setting curve and a price setting curve to illustrate the change to the equilibrium level of employment if there is a reduction in the degree of competition faced by firms. Clearly state what will occur to the real wage and the level of unemployment. (c) Suppose the economy has low aggregate demand with high unemployment. Use a new wage setting curve and price setting curve diagram to explain how the economy could automatically adjust back to equilibrium. Would this occur in reality? Justify your answer.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Unemployment

Section: Chapter Questions

Problem 10PA

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