Inflation for the past several years has been 3% and people believe it will continue to...

Inflation for the past several years has been 3% and people believe it will continue to be 3% in the future. The economy starts out at full employment.

a. If a worker earned $20 an hour last year, how large is the raise you would expect the worker to receive in the next year’s contract? (Give a $ amount.)

b. If all workers experience the same percentage wage change, will the AS curve shift up or down? Briefly explain.

c. Will the Fed need to increase or decrease AD to keep the economy at full employment? Briefly explain.

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Rahul Sunny answered 2 weeks ago

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