Question: Answer the following two questions. 1. Derive the natural rate of unemployment un in the labor market by discussing the interaction between the wage

Answer the following two questions. 1. Derive the natural rate of unemployment un in the labor market by answer and discuss the final effect on the natural rate of unemployment using the relevant diagram for the

Answer the following two questions. 1. Derive the natural rate of unemployment un in the labor market by discussing the interaction between the wage determination equation, W = Pe F(u, z), and the price determination equation, P = (1 + m)W. Also, show the interaction between the wage- setting equation and the price-setting equation using the relevant diagram. 2. Consider the labor market represented by the wage-setting and the price-setting relations. Answer the following three questions. a. Discuss how changes in real wages can be understood according to collective bargaining theories and efficiency wage theories. b. What will happen to the labor market if the government extends the length of time workers could receive unemployment benefits? Explain the logic behind your answer and discuss the final effect on the natural rate of unemployment using the relevant diagram for the labor market. c. What will happen to the labor market if the mark-up of prices over unitary costs is reduced? Explain the logic behind your answer and discuss the final effect on the natural rate of unemployment using the relevant diagram for the labor market.

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