Low-Employment Disequilibrium in the WS-PS Model (Point C)
In the WS-PS model, a disequilibrium state exists when employment is below the equilibrium level, represented by a point like C. At this point, firms find they can reduce wages to a level like wC and still adequately staff their operations and motivate workers. This creates a scenario where potential profits are higher, setting the stage for an economic adjustment back towards equilibrium.
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Ch.1 The supply side of the macroeconomy: Unemployment and real wages - The Economy 2.0 Macroeconomics @ CORE Econ
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Figure 1.25: The WS-PS Model, Case 2: Employment Below Equilibrium
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Low-Employment Disequilibrium in the WS-PS Model (Point C)
WS-PS Model's Prediction of the Unemployment-Inflation Relationship
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