Case 1 (I) Upon empiry of the existing constructs, suppose employers and employees decide to revise the nominal wage (W) downward under a new set of contracts because they expect a fall in the future price level (Pei) . (a) Explain how it would affect aggregate supply in the short run (SRAS) . (b) The fall in P5 implies that there would be a fall in expected ination (9;) as well. As a result, interest rate in the money market (rmoney = Rmomy 9;) would now exceed that in the loanable-funds market (rm't) . 2') Explain how to eliminate such interest-rate gap via an adjustment in the price level (i.e., Padjustment). ii) Explain how the gap can also be eliminated via an adjustment in real output (i.e., yd-adjustment). ii) Conclude how aggregate demand (AD) would respond to the fall in expected future prices