Answer the questions below well.

Draw a diagram to illustrate the labour market. Label the aggregate demand for labour

curve ADL , the labour force curve as N and the aggregate supply of labour curve ASL .

(ii) Mark on your diagram a point A where the labour market is in equilibrium. Label the

equilibrium wage rate w1 and the equilibrium level of employment Q1 .

(iii) Mark on your diagram the distance that represents the equilibrium (or natural) level of

unemployment and label it EQ.

12.10 Which one of the following is NOT a cause of cost-push inflation?

A an increase in the price of raw materials

B an increase in wages above increases in labour productivity

C an increase in profit margins applied by firms

D an increase in consumer spending

Use the AD-AS model to illustrate and explain the difference between demand-pull and cost-push

inflation. Your answer does not need to cover scenarios in which both the aggregate demand and

aggregate supply curves shift.

Consider the life insurance policy described in Example 8.2.1. Display, for 0