Q1. Assume the labor demand curve of the firm is
W= 20 - 0.01 E
where w is the hourly wage and E is the level of employment. The Union's utility function is
U= WE
Illustrate wage would a monopoly union demand? Explain how many workers would be employed under the union contract?
Q2. Assume which the policymakers in a closed economy want to increase output without changing interest rates. Illustrate kind of policy mix would you recommend? Explicate your answer and the adjustment processes which take place with the help of an IS-LM diagram.