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Use the information below to explain adjustments that move the economy to a long-run equilibrium.Assume that firms and workers have adaptive expectations.
The current unemployment rate = 4%.
The natural rate of unemployment = 6%.
Last year's inflation rate = 3%.
This year's inflation rate = 4%.
Wage Increase
An upward adjustment in the salary or hourly rate of workers.
Alpha Car Wash
A hypothetical or specific business specializing in offering car washing services to its customers.
Supply Of Workers
Refers to the availability of individuals willing and able to work in a particular job market.
Market Wages
The prevailing pay rate for work in a particular market, industry, or profession, determined by supply and demand for labor.
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