Suppose that all other factors affecting the labor market remain constant. Graphically illustrate and explain what is the effect of an increase in unemployment benefits on the equilibrium levels of...

q15

Extracted text: Suppose that all other factors affecting the labor market remain constant. Graphically illustrate and explain what is the effect of an increase in unemployment benefits on the equilibrium levels of real wage and unemployment. (Hint: In your graph, put the real wage on the vertical axis, and the level of unemployment on the horizontal axis. Use wage-setting relation and price-setting relation to analyze the question.)