a. Using the labor market model, draw a diagram to show how an increase in the degree
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Question:
a. Using the labor market model, draw a diagram to show how an increase in the degree of competition would be expected to affect the relevant curves. Briefly explain each curve in your diagram.
b. Compare the new with the old equilibrium and create a table like bellow, fill in the table by writing higher, lower, or unchanged in each cell (e.g. if you think the Unemployment rate is higher in the new equilibrium, write ‘higher’ in the first cell) (15 marks)
Unemployment rate | Real wage | Output | Inflation rate | Interest rate | |
New equilibrium following the policy change |
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