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You are given the following labor demand and labor supply curves for the economy.
d s
N = 250-2(W\\P) N = 3(W/P)
Suppose that the nominal wage rate equals 60. In the short-run, aggregate demand and aggregate supply are equal at a price level of 1.0. Compute the real wage rate. Explain where actual real output is relative to natural real output. Suppose that policymakers change aggregate demand so that in long-run equilibrium, the nominal wage rate stays at 60. What is the long-run equilibrium price level? Explain whether policymakers took actions that increased or decreased aggregate demand.
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