Suppose that the equilibrium real wage (the intersection between the supply and the demand for labor)...
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Suppose that the equilibrium real wage (the intersection between the supply and the demand for labor) in the job market is 6. (a) If the price level is 3, what is the nominal wage? (b) Consider a leftward shift the demand of labor that would lower the real wage to 4. If firms are unwilling to cut nominal wages to reestablish equilibrium, i.c., they leave the nominal wage unchanged (and equal to the value you found in (a)), then how will the labor market be affected? Draw a graph to illustrate your answer. (c) By what percentage should the price level rise to reestablish equilibrium in the labor market given the unwillingness of firms to cut nominal wages? Suppose that the equilibrium real wage (the intersection between the supply and the demand for labor) in the job market is 6. (a) If the price level is 3, what is the nominal wage? (b) Consider a leftward shift the demand of labor that would lower the real wage to 4. If firms are unwilling to cut nominal wages to reestablish equilibrium, i.c., they leave the nominal wage unchanged (and equal to the value you found in (a)), then how will the labor market be affected? Draw a graph to illustrate your answer. (c) By what percentage should the price level rise to reestablish equilibrium in the labor market given the unwillingness of firms to cut nominal wages?
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a If the equilibrium real wage is 6 and the price level is 3 then the nominal wage is Nominal wage R... View the full answer
Related Book For
Macroeconomics
ISBN: 978-0321675606
6th Canadian Edition
Authors: Andrew B. Abel, Ben S. Bernanke, Dean Croushore, Ronald D. Kneebone
Posted Date:
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