In a statement not long ago, a distinguished economist claimed:

"There is considerable debate about whether real wage growth is due to business 'monopoly' power pushing prices up against wages or to wage suppression resulting from labour's diminished bargaining power."

1. a)Use the WSPSmodel of Carlin and Soskice to interpret in detail Taylors' comment above. Within the context of this model, what other factors can you think of that might explain low real wage growth? (6 points)
2. b)Give two examples each, with explanations, of possible factors that shift the WS andPS curves, along with the consequences for the economy. (4 points)