1 5) Demand for Labor Function 100 90 80 60 Real Wage 6 8 8 8 8 30,000 40,000 10,000 20,000 50,000 60,000 70,000 80,000 Number of Workers The graph shows the aggregate demand for labor in a small country with a civilian population of 100,000 persons. The labor force participation rate in this country is only 30% and it does not depend on the level of real wage. Wages and prices are fully flexible downwards and upwards. So we are talking about long run. In this country the equilibrium real wage equals units. At this real wage, people are willing and able to work, and there are jobs available in the economy. For future reference, let's call this case the base case. 1 5) Demand for Labor Function 100 90 80 Real Wage 0 6 8 8 8 8 8 8 10,000 20,000 50,000 60,000 70,000 80,000 30,000 40,000 Number of Workers The graph shows the aggregate demand for labor in a small country with a civilian population of 100,000 persons. The labor force participation rate in this country is only 30% and it does not depend on the level of real wage. Wages and prices are fully flexible downwards and upwards. So we are talking about long run. In this country, if the price level equals P = 10, the equilibrium nominal wage will equal dollars. If the price level increases by 20%, the new equilibrium nominal wage will equal dollars so that the new equilibrium real wage will equal units