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Question 1

Assuming the economy is in an initial equilibrium at X, identify where the new equilibrium will be, if:

Aggregate supply
  1. There is an increase in the number of labour strikes which raises average wages but does not improve productivity.

  2. The exchange rate of Sterling depreciates.

  3. There is an oil shock which raises oil prices.

  4. Labour markets are deregulated to enable greater competition from non-EU workers.