MACROECONOMICS
14th Edition
ISBN: 9781337794985
Author: Baumol
Publisher: CENGAGE L
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Chapter 10, Problem 2TY
To determine
To describe: The relationship between the real wages and the price level and also to relate the findings with the
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Carefully explain why the price level are rigid in the short run (SR). Illustrate your answer using a real world example where a price of an item may not change for months even though the raw material cost to produce that item may change.
Suppose that a consulting firm has generated the following information about the economy of Growville:
(i) The current employment in export industries is 50,000;
(ii) The current total employment in the city is 150,000;
(iii) Export employment is expected to grow by 10,000 jobs.
a. Is there enough information to accurately predict the effect of the increase in export employment on total employment?
b. If you have enough information, predict the employment effect and illustrate your answer with a graph.
c. If there is insufficient information, proceed with the analysis as far as you can and list the additional information you need to complete the analysis. Illustrate your answer with a graph.
Draw a correctly labeled graph of the long-run aggregate supply and short-run aggregate supply curves.
Show each of the following in your graph. Assume that the economy of your graph's country has an actual unemployment rate that is less than the natural unemployment rate.
Help with the last two bullet points.
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