due to the Keynesian and New Keynesian;

a. Show and explain the existence of involuntary unemployment in the labor market by using the Efficiency Wage Theory.

b. Is the employment level that you found same with the full employment level indicated by the classical labor market theory? Why? Why not?

c. According to the Keynesian theory, what would be the effect of the "A wave of investor and consumer pessimism about the future profitability of capital investments and lower future income" on output (Y), the real interest rate (r), employment (L) and the price level (P)? Distinguish between the short run and the long run effects by using the IS-LM-FE and AD-AS models and the effective labor demand theory.