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Consider an economy in the medium-run equilibrium (where the wage-setting and the price-setting curves cross). Suppose that more workers join trade unions, which increases their
Consider an economy in the medium-run equilibrium (where the wage-setting and the price-setting curves cross). Suppose that more workers join trade unions, which increases their bargaining power against employers. Assume that the level of employment and the labour supply remain constant in the short run. (a) Using the labour market diagram show what happens to unemployment and real wages in the labour market in the medium run.
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