Question 4 (length guide: about 23 pages including graphs) A major war breaks out in Europe, which leads to a large increase in the price of oil and gas. a) After carefully explaining the intuition for the wagesetting/price-setting model (WS PS) , show how this increase in the relative price of energy affects equilibrium real wages, unemployment and output. (15 marks) b) If the war ends quickly and relative energy prices return to their prewar levels, use the WSPS diagram to compare real wages, unemployment and output in the pre-war and post-war medium run eguilibria. (5 marks) c) If the war continues for a long time, and relative energy prices remain very high, explain what will happen to the real wage, unemployment and output