The natural rate of unemployment Suppose that the markup of goods prices over marginal cost is 5%,

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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.

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Macroeconomics

ISBN: 9780134897899

8th Edition

Authors: Olivier Jean Blanchard

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Question Posted: Mar 11, 2024 03:00 AM

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The natural rate of unemployment Suppose that the markup of goods prices over marginal cost is 5%,

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a The pricesetting equation is given by P 1 m MC where P is the price level m is the markup of price...View the full answer

Macroeconomics

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