Question: I got the first answer right but not the other three. Can you help me figure it out? Thanks in advance! 7.000 6.500 6.000 5.500

I got the first answer right but not the other three. Can you help me figure it out? Thanks in advance!

I got the first answer right but not the other three. Can

7.000 6.500 6.000 5.500 5.000 4.500 4.000 Real Wage (W/P) 3.500 .000 N .500 2.00 00 1.500 95,000 99,000 94,000 97,000 102,000 103,090 96,000 100,000 101,090 98,000 104,000 91,000 93,000 105,000 90,000 92,000 Number of Workers (L) Consider the Labor Market Graph above. This graph shows the labor market conditions in a hypothetical country. The natural rate of unemployment in this country is 5 percent. In other words, even during normal times 5 percent of the labor force is unemployed. The natural unemployment is solely due to labor market frictions. The potential GDP in this country equals Yp - 10,000. Okun's alpha equals 2. Currently the nominal wage rate is W - 400 and the price level is P - 100 Suppose that foreign countries reduce their demand for domestic goods. As a result demand for labor decreases by 4,000 workers. Assume that the reduction in foreign demand for domestic goods causes the domestic price level to decrease by 25 percent and the resulting reduction in demand for labor causes the nominal wage rate to decrease by 6.25 percent. So now we have the following: Real wage - 5.00 Cyclical rate of unemployment = 4.00 percent Overall rate of unemployment = 9:00 percent Real GDP = 9200.00

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!