Chat with AI
Macroeconomics 5th Edition by Olivier Blanchard
Edition 5ISBN: 978-0132159869Macroeconomics 5th Edition by Olivier Blanchard
Edition 5ISBN: 978-0132159869 Exercise 7
Supply shocks and wage flexibility
Suppose that the Phillips curve is given by
Recall that this Phillips curve was derived in this chapter under the assumption that the wage bargaining equation took the form
We can think of a as a measure of wage flexibility-the higher is a, the greater is the response of the wage to a change in the unemployment rate, a u t.
a. Suppose = 0.03 and z = 0.03. What is the natural rate of unemployment If = 1 if = 2 What is the relation between and the natural rate of unemployment Interpret your answer.
In Chapter 7, the text suggested that a reduction in the bargaining power of workers may have something to do with the economy's relatively mild response to the increases in oil prices in the past few years as compared to the economy's response to increases in oil prices in the 1970s. One manifestation of a reduction in worker bargaining power could be an overall increase in wage flexibility, i.e., an increase in a.
b. Suppose that as a result of an oil price increase, p increases to 0.06. What is the new natural rate of unemployment if = 1 if = 2 Would an increase in wage flexibility tend to weaken the adverse effect of an oil price increase Explore Further
Suppose that the Phillips curve is given by
Recall that this Phillips curve was derived in this chapter under the assumption that the wage bargaining equation took the form
We can think of a as a measure of wage flexibility-the higher is a, the greater is the response of the wage to a change in the unemployment rate, a u t.
a. Suppose = 0.03 and z = 0.03. What is the natural rate of unemployment If = 1 if = 2 What is the relation between and the natural rate of unemployment Interpret your answer.
In Chapter 7, the text suggested that a reduction in the bargaining power of workers may have something to do with the economy's relatively mild response to the increases in oil prices in the past few years as compared to the economy's response to increases in oil prices in the 1970s. One manifestation of a reduction in worker bargaining power could be an overall increase in wage flexibility, i.e., an increase in a.
b. Suppose that as a result of an oil price increase, p increases to 0.06. What is the new natural rate of unemployment if = 1 if = 2 Would an increase in wage flexibility tend to weaken the adverse effect of an oil price increase Explore Further
Explanation
Verified
Verified
(a) To determine the natural rate of une...
Macroeconomics 5th Edition by Olivier Blanchard
Why don’t you like this exercise?
Other Minimum 8 character and maximum 255 character
Character 255
