10. (LO 6) Suppose that the economy of Witland in Figure 5.27 is at full-employment equilibrium and...
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10. (LO 6) Suppose that the economy of Witland in Figure 5.27 is at full-employment equilibrium and the present nominal wage is $24 per hour.
a) What is the real wage rate (in base year prices)?
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b) Suppose that the aggregate demand increases by $400.
Draw in the new AD curve in Figure 5.27.
c) At the new equilibrium real GDP level, what will be the value of the real wage rate?
d) As a result of the change in prices in (b), suppose the nominal wage increases, causing aggregate supply to change by $400. Draw in the new AS curve in Figure 5.27.
e) At the new equilibrium, what will be the new real wage rate?
f) At the new equilibrium in (e), what is the value of the nominal wage rate?
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