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Unemployment rates on the balance of bargaining power

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1) Explain why the Aggregate Supply curve becomes increasingly steeply sloped at levels of RGDP near "full employment" and becomes especially steeply sloped beyond "full employment" RGDP (hint: this topic is not discussed in your text... you will need to understand this week's lecture notes to answer this).

2) Why might the rate at which the Aggregate Supply curve shifts vertically upward increase when an economy produces beyond full employment. (Hint: think about the effect of very low unemployment rates on the balance of bargaining power between employers and workers)

3) Explain why inflation rates are likely to rise when an economy expands beyond full employment capacity output. Draw an aggregate supply-aggregate demand diagram to illustrate your answer. (Hint: utilize your answers to #1 & #2 to answer this question)

Reference no: EM13737197

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