Question: please help with the question below, thanks in advance. Suppose the pricesetting equation is given by P=(1+m)W where m is the markup. The wagesetting equation

please help with the question below, thanks in advance.

please help with the question below, thanks in advance. Suppose the pricesetting

Suppose the pricesetting equation is given by P=(1+m)W where m is the markup. The wagesetting equation is given by W=PeE u where z are unemployment benefts and u is the unemployment rate. 1. Derive the real wage and unemployment consistent with equilibrium in the labor market in the medium run. Is this the natural rate of unemployment? Does the equilibrium rate of unemployment change if unemployment benefts decrease? Explain? [8 marks] 2. Draw the wagesetting and price-setting lines on a diagram with u on scaxis and W/ P on yaxis. In the diagram, show the change of the natural rate of unemployment if unemployment benefts decrease. [4 marks] 3. Derive the aggregate supply relation? What happens to the AS curve if unemployment benets decrease? How will the change aect the ASAD equilibrium? Draw the AS AD curves and explain? [8 marks]

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