The Supply Side 1. (a) State the WS and PS functions. (b) Derive the PS equation...

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The Supply Side 1. (a) State the WS and PS functions. (b) Derive the PS equation with and without tax wedge. (c) Explain all the factors affecting WS and PS. 2. (a) Derive PC curve mathematically (from wage inflation and price inflation equations) and graphically. (b) Using IS, WS-PS and PC curves, explain the effect of a negative aggregate demand shock in the absence of stabilizing policies. (c) Using IS, WS-PS and PC curves, explain the effect of an increase in union power. The Supply Side 1. (a) State the WS and PS functions. (b) Derive the PS equation with and without tax wedge. (c) Explain all the factors affecting WS and PS. 2. (a) Derive PC curve mathematically (from wage inflation and price inflation equations) and graphically. (b) Using IS, WS-PS and PC curves, explain the effect of a negative aggregate demand shock in the absence of stabilizing policies. (c) Using IS, WS-PS and PC curves, explain the effect of an increase in union power.

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1 a The WS wagesetting function represents the relationship between the real wage rate and the level of employment It can be expressed as WS w pe where w is the nominal wage rate pe is the expected pr... View the full answer