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Condition for WS-PS Equilibrium Stability: Stable WS and PS Curves
The equilibrium real wage and unemployment rate predicted by the WS-PS model are considered stable and represent a long-term average for the economy. However, this stability is conditional upon the wage-setting (WS) and price-setting (PS) curves remaining in their current positions. Any economic changes that cause either of these curves to shift will lead to a new equilibrium point with a different real wage and unemployment rate.
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Introduction to Macroeconomics Course
Ch.1 The supply side of the macroeconomy: Unemployment and real wages - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
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Consistency of Decisions at Equilibrium in the WS-PS Model
Disequilibrium in the WS-PS Model
Firms' Incentives at the WS-PS Equilibrium
Workers' Incentives at the WS-PS Equilibrium
Incredibility of Low-Wage Promises at the WS-PS Equilibrium
Condition for WS-PS Equilibrium Stability: Stable WS and PS Curves
Powerlessness of the Unemployed at the WS-PS Equilibrium
The Persistence of Involuntary Unemployment in Equilibrium
Figure 2.10: The WS-PS Model at the Initial Equilibrium
Definition of Supply-Side Equilibrium in the WS-PS Model
Zero Inflation at the WS-PS Equilibrium
An economy is operating at the intersection of its wage-setting (WS) and price-setting (PS) curves. Which statement best explains why this point represents a Nash equilibrium?
Labor Market Dynamics Away from Equilibrium
Credibility of a Low-Wage Offer at Equilibrium
Consider an economy in a stable state where firms have set their wages at a level that maximizes their profits, given the prices they charge and the effort levels of their employees. If a single firm decides to unilaterally reduce the wages it pays its workers, what is the most likely immediate outcome for that specific firm, assuming all other economic conditions remain constant?
Definition of Nash Equilibrium
Incentives at Labor Market Equilibrium
Learn After
Consider an economy in a stable equilibrium where the real wage and unemployment rate are determined by the intersection of a wage-setting (WS) curve and a price-setting (PS) curve. A new government policy is enacted that significantly increases the level of competition among firms in the product market. Assuming the factors influencing the wage-setting curve remain unchanged, what is the most likely outcome for the new stable equilibrium?
Analyzing a Labor Market Policy Change
Impact of Labor Market Regulation on Equilibrium
In the wage-setting/price-setting model, a stable equilibrium implies that the economy's real wage and unemployment rate are permanently fixed and will not change in response to external economic shocks or policy changes.
Analyzing Shifts in Labor Market Equilibrium