We now return to the case where z = 1. Assume now that the markup depends...

 

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We now return to the case where z = 1. Assume now that the markup depends on the level of unemployment, i.e., m = 0.5(1-u). 1. Find the expression for the real wage of the price setters as a function of the unemployment rate. (2 points) 2. Sketch the graphs of the price-setter relation and the wage setter relation on a graph with unemployment on the x-axis and the real wage on the y-axis. (2 points) 3. Without finding the exact numerical value, find the equation that can be used to find the equilibrium unemployment rate. (3 points) 4. Now assume that 2 decreases by 10%. Graphically represent how the change in 2 affects the equilibrium unemployment rate and the equilibrium real wage rate, and discuss what happened. (3 points) We now return to the case where z = 1. Assume now that the markup depends on the level of unemployment, i.e., m = 0.5(1-u). 1. Find the expression for the real wage of the price setters as a function of the unemployment rate. (2 points) 2. Sketch the graphs of the price-setter relation and the wage setter relation on a graph with unemployment on the x-axis and the real wage on the y-axis. (2 points) 3. Without finding the exact numerical value, find the equation that can be used to find the equilibrium unemployment rate. (3 points) 4. Now assume that 2 decreases by 10%. Graphically represent how the change in 2 affects the equilibrium unemployment rate and the equilibrium real wage rate, and discuss what happened. (3 points)