Chi-Wa Yuen Part A: Short-answer questions (80%) A.1 (20 points) Movements along the AS curves Given the technology parameter (A) and the capital stock (K), we can determine labor employment (N), along with wages (w and W) and rentals (r, and R,), from equilibria in the labor and capital- input markets, and the quantity of output supplied (Ys) from the production function. Consider the six variables mentioned above - viz., Ys, N; W, w; Rx, and rx - in the context of the following SRAS diagram. PA D SRAS B Ys (a) Which of these 6 variables {Ys, N; W, w; Rx rx) would remain constant as we move downward along this SRAS curve (say, from point D to point B)? (b) Which of these 6 variables {Ys, N; W, w; Rx x} would change and in what direction as we move downward along this SRAS curve (say, from point D to point B)? (c) Which of these 6 variables {Ys, N; W, w; R r,) would remain constant, and which of them would change and in what direction, as we move downward along a given vertical LRAS curve? A.2 (15 points) Shift in AS curves due to revision of labor contracts