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Macroeconomics 5th Edition by Olivier Blanchard
Edition 5ISBN: 978-0132159869Macroeconomics 5th Edition by Olivier Blanchard
Edition 5ISBN: 978-0132159869 Exercise 7
The natural rate of unemployment
Suppose that the markup of goods prices over marginal cost is 5%, and that the wage-setting equation is
W = P(1 - u),
Where u is the unemployment rate.
a. What is the real wage, as determined by the price-setting equation
b. What is the natural rate of unemployment
c. Suppose that the markup of prices over costs increases to 10%. What happens to the natural rate of unemployment Explain the logic behind your answer.
Suppose that the markup of goods prices over marginal cost is 5%, and that the wage-setting equation is
W = P(1 - u),
Where u is the unemployment rate.
a. What is the real wage, as determined by the price-setting equation
b. What is the natural rate of unemployment
c. Suppose that the markup of prices over costs increases to 10%. What happens to the natural rate of unemployment Explain the logic behind your answer.
Explanation
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(a) To determine real wage, we can use t...
Macroeconomics 5th Edition by Olivier Blanchard
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