Graphical Representation of Equilibrium Unemployment in the WS-PS Model
In the standard WS-PS diagram, the amount of unemployment at the supply-side equilibrium can be visually determined. It is represented by the horizontal distance between the equilibrium level of employment (at point A) and the vertical line indicating the total labor force.
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Economics
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Introduction to Macroeconomics Course
Ch.4 Inflation and unemployment - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
CORE Econ
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In a diagram where the real wage is on the vertical axis and employment is on the horizontal axis, an economy's equilibrium is found at the intersection of an upward-sloping wage-setting (WS) curve and a horizontal price-setting (PS) curve. The total labor force is represented by a vertical line to the right of this equilibrium. If the government enacts a new policy that strengthens workers' bargaining power, what is the resulting effect on the graphical representation of equilibrium unemployment?
Interpreting Unemployment in the Supply-Side Model
Calculating Equilibrium Unemployment
In a standard supply-side model with employment on the horizontal axis and the real wage on the vertical axis, a decrease in the price markup set by firms will lead to a reduction in the horizontal distance between the equilibrium employment level and the total labor force.