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1. Suppose the economy is at long run equilibrium and there is increase in labor costs without any other changes in the economy. a. Show

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1. Suppose the economy is at long run equilibrium and there is increase in labor costs without any other changes in the economy. a. Show the potential effect of this on AD or ERAS on the graph. Draw another AD or SEAS, whichever and wherever you think will shift LRAS Price level SRASZL ADl NRGDP \"GDP b. Explain briefly why do you think this shift will happen? Why an increase in labor costs will change AD or SRAS? c. How will it affect the following: increase or decrease? II Production? II Unemployment? I Price level? d. Will this result in cyclical unemployment? (yes or no) How can you tell

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