Assume there is inflation, but wages are “sticky” while prices are not (yes, I know this is not a macro class, but stay with me). Note: We have not done anything exactly like this before, but think through how this would affect our Labor-Leisure graphs and the implications of that. a. Draw a general budget constraint and show what happens to it when this inflation raises the price of goods without changing the wage. What is the intuition behind this change? b. What happens to the reservation wage? c. Assume someone works positive hours before the inflation. In a graph, show what happens to their optimal choice after the inflation occurs. Decompose this change into the income and substitution effect. Show them graphically as well as describe in words what is occurring.