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Hi I've been working o the fifth question for more than 2 hours and I can't find any solution can you help me please.

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Hi I've been working o the fifth question for more than 2 hours and I can't find any solution can you help me please.
Answered Same Day Dec 22, 2021

Solution

Robert answered on Dec 22 2021
109 Votes
a
equate Ad with AS to get
a(w) +bY= c-dY
Ye= c-a(w)
+d
eq 1
Pe= c- dY = [cb +da(w)] /[b+d]
eq2
.
shown
c.
this is a recessionary gap as actual Y < potential Y
d.
As we have a recessionary gap, resources are idle. So there is downward pressure on wages w. A fall in w causes fall in a,...
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