QUESTION 6 (12 Marks) Infly Expects F-fl - BE 2 - 3 - 1 Consider a scenario where the South African economy is in a business cycle upswing in year 1 and there is a positive bargaining gap of 1 per cent in the labour market. At this point unemployment is 3 per cent (whereas the inflation-stabilising unemployment rate is 5 per cent). Also assume that the current inflation rate is 3 per cent. Answer the questions below. 6.1 Given the above information, what would the realised (actual) inflation rate in the economy be in year 2? Provide a detailed explanation for your answer. [3] 6.2 Briefly explain how the unemployment rate in the business cycle upswing being lower than the inflation-stabilising unemployment rate leads to a positive bargaining gap in the labour market. [3] real meyer Page 12 of 13