8. The markup rate (m) is 0.05, the expected price level (Pe) is 0.1, the wage setting equation is: W=Pe (1-u) and the price setting equation is: P=91+m)W. Assume that L=1.

A) Calculate the real wage (W/P).

B) Find the AS curve and show it in a graph.

C) Assume now that the expected price level (Pe) is 0.2. Find the new AS curve

D) Show the new AS curve in a graph.

Answer rating: 100% (QA)

A To calculate the real wage WP we need to substitute the given equations into each other Given Markup rate m 005 Expected price level Pe 01 Wage sett... View the full answer