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Suppose the inverse demand curve for a market is equal to p = 100 -- 0.3Q. The inverse market supply curve is p = 20 + 0.5Q.
1. Calculate the equilibrium price and quantity;
2. Calculate the consumer surplus, producer surplus and total surplus.
Show the effects on the price level and real GDP of a major union wage settlement that significantly increases wages. Is this a supply shock, a demand shock, or both?
Compare Classical economic theory to Keynesian economic theory. Which approach, if either is the US currently applying and what have been the effects of such policies?
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