W/P IS (W/P). PS i pvt LM i10y (W/P) 1 iff WS Y Y1 U1 CV n Un Y PC U1 Un II2. On the next slide, the economy finds itself at \"1: (W/P)1 at which u > u,1 . According to the New Consensus, all that needs to happen is for workers to accept a lower wage and the economy will return to equilibrium. Briefly explain here (just a few sentences) what is occurring, and then show this in the graph on the next slide. (22 possible) ANSWER: W/P (W/P) , (W/P). PS WS up U1 UECON 301 SPRING 2021 This time there is some explanation required in addition to graphing. If you need more space for nongraphing questions, feel free to insert slides. This material is from Weeks 10 and 12. Points possible = 40 (20 each) Due date is Friday, May 14 at 11:59pm 1. The core point of the New Consensus framework is that there is "self-adjustment" in the economy if it finds itself at Y > Y (which is also u u,). This self adjustment usually is believed to occur through inflation expectations. On the next slide, the economy finds itself after a shift right of IS at point Y, in IS-LM, at uj , T in the PC graph, and up, (W/P), in the WS-PS graph. Explain on this slide what happens for the economy to "self-adjust" back to equilibrium, and then show these adjustments in the graphs on the next slide. (22 possible)