A fall in the unemployment benefit would reduce the intercept of both the labour

supply and the wage-setting curve. In a graph with labour supply, WS and PS

explain how this incident will affect the decision of the firms and the equilibrium

unemployment? State why this happens. (Make sure to mention the axes and

direction of the shifts of the curves) (2 points)

b) Explain with 3-equation model along with graphical explanation how the recent

amendment in "Essential commodity act" in India will create shock in the

economy. State which curve will shift and what would be the consequences of this

enforcement on inflation, output and unemployment in the current year.