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Q3 - Modules L7 . Inflation and the Phillips Curve [Suggested word count for Q3: 300 to 400 words] Assume an economy at labor market

Q3 - Modules L7. Inflation and the Phillips Curve

[Suggested word count for Q3: 300 to 400 words]

Assume an economy at labor market equilibrium with stable prices (inflation is zero) prior to COVID-19. Due to COVID-19, investment declines, and the economy moves into recession with high unemployment. Use the WS/PS/AD model to show why and how this would result in a negative bargaining gap.

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