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In Northlandia, there are no labor contracts

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In Northlandia, there are no labor contracts, that is, wage;rates can be renegotiated at any time. But in Southlandia, wage;rates are set at the beginning of each odd year and last for two;years. Why would equal-sized falls in aggregate output due to a;fall in aggregate demand have different effects on the magnitude;and duration of unemployment in these two economies?

 

Paper#25706 | Written in 18-Jul-2015

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