Consider the labour market represented in the following graph: real wage positive output gap K W P equilibrium employment high employment WS PS Employment rate Where WS represents the Wage Setting relationship, and PS represents the Price Setting relationship. Select ALL the CORRECT statements: The positive output gap may generate deflationary pressure in this economy. The Central Bank may decrease interest rate to restore equilibrium in the economy. At point E in this economy, actual prices are equal to expected prices. When the economy moves from point E to point X, actual unemployment may be below its equilibrium level.

Consider the labour market represented in the following graph: real wage positive output gap K W P equilibrium employment high employment WS PS Employment rate Where WS represents the Wage Setting relationship, and PS represents the Price Setting relationship. Select ALL the CORRECT statements: The positive output gap may generate deflationary pressure in this economy. The Central Bank may decrease interest rate to restore equilibrium in the economy. At point E in this economy, actual prices are equal to expected prices. When the economy moves from point E to point X, actual unemployment may be below its equilibrium level.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter18: Introduction To Macroeconomics: Unemployment, Inflation, And Economic Fluctuations

Section: Chapter Questions

Problem 1P

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