Question:

Labor unions became better organized, allowing them to drive up wages in the short run in the US on AD/AS?

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Labor unions become better organized, and this allows them to drive up wages in the short run in the US. What would be the effects on the AD/AS graph in the short run and long run?

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  1. Personal intuition:

    This sounds like classical unemployment to me. When classical unemployment increase, output decrease, consumption decrease, AD shift left. Personal intuition, might be wrong, better to double confirm with your professor.

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