Suppose that the mark-up of goods prices over marginal costs is 10% and that the wage-setting equation is W=P(1-u), where u is unemployment rate. Calculate the real wage, as determined by the price-setting equation and the natural rate of unemployment.
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Suppose that the mark-up of goods prices over marginal costs is 10% and that the wage-setting equation is W=P(1-u), where u is
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- An economy is described by the following equations C = 62 + 0.6 (Y - T) T = 100 IP = 200 G = 80 NX = -30 Y* = 600 find the level of total unemployment at Y (actual output). Assume the Natural rate of Unemployment = 5%If the rate of separation is 10% and the rate of finding a job is 20%, then the equilibrium unemployment rate is a) 33.33% b) 50.00% c)) 66.67% d) 100.00% 2) When there is an increase in the rate of unionization in an economy, then a) frictional unemployment increases. b) the natural rate of unemployment increases. c) both a) and b) are correct. d) neither a) nor b) are correct. 3) If the Philips curve is ?? = ????- 3(?? - ?? ??) + ?? and there are no supply shocks. If monetary policy's target is 6%, the natural rate of unemployment is 6%, and inflation has been 9%, what does the unemployment rate have to be to achieve their target? a) 3% b) 6% c) 7% d) 9% 4) If the sacrifice ratio is estimated to be 3, then to reduce inflation by 3 percentage points, would require a) a total output increase of 1% v. b) a total output increase of 9%. c) a total output decrease of 1%. d) a total output decrease of 9%. 5) Which of the following would be an explanation for a hysteresis effect that…In which of the following cases will we observe unemployment? the quantity of labor demanded is greater than the quantity of labor supplied at the going wage rate. the wage is below the level that balances supply and demand for labor. there is a shortage of workers. the quantity of labor demanded is less than the quantity of labor supplied at the going wage rate.
- Considering the wage-setting relation, which one of the following will definitely result in a decrease in the natural rate of unemployment? (a) An increase in the mark-up of firms; (b) A decrease in the unemployment rate; (c) An increase in the expected price level; (d) A reduction in the labour laws protecting workers.If the rate of job separation is 1% and the rate of job finding is 10%, the natural rate of unemployment is, approximately equal to Question options: 9% 1% 11% 90% none of the aboveIf unemployment is above the natural rate of unemployment, then potential GDP is: A) Equal to actual GDP B) Greater than actual GDP C) Equal to the GDP gap D) Less than actual GDP
- Which of the following statements is false? Sticky wage theories presume that the main cause of unemployment is the existence of wage rigidities. Sticky wage theories explain frictional, structural and cyclical unemployment. Union bargaining theory is an example of a sticky wage theory. None of the above statements are false.In the Mortensen-Pissarides model of unemployment, the following variables are exogenous f, k, y, u B, 0, k, s A, s, f, 0 A, s, y, k2) The natural level of employment will increase when which of the following occurs? A) a decrease in the markup of prices over costs B) an increase in the natural level of output C) an increase in the actual unemployment rate D) an increase in unemployment benefits E) an increase in the markup of prices over costs
- The rate of job separations in the economy is 0.013 (1.3 percent) and rate of job finding is 0.25 (25 percent). a) If the economy has 500 workers in the labor force, calculate the unemployment rate and the number of unemployed in the steady state. b) If the rate of job separations is 1 percent, what happens to the unemployment rate and the number of unemployed in the steady state? c) If labor force suddenly increases by 20 workers who are seeking work (and the rate of job separations remains at 1 percent), what is the immediate change in the unemployment rate? What is the new steady-state unemployment rate? Draw a graph on how unemployment rate evolves in time.The labour market in an economy is characterised by the following equations: Wage setting: Price setting: W p² W Р = 0.9-0.5u = 1 1+µ -A In which W is nominal wages, pe and P are expected nominal prices and nominal prices, respectively, u is level of unemployment. µ is the price mark-up and λ is the marginal product of labour. Assume μ = 0.3 and λ = 1.1 Considering this information, which of the following statements are CORRECT: Improvement in working conditions will have no effects in the equilibrium level of unemployment in this economy. If this economy's actual output is below its potential output, there is pressure for real wages to decrease below 0.85 (i.e., W<0.85). If price marginal product of labour decreases to 1, the equilibrium real wage in this economy will decrease. A positive demand shock will change the equilibrium variables in this economy.Describe the relationship between the size of the employment rent and (i) the expected duration of unemployment (ii) the size of the unemployment benefit per hour and (iii) the size of the psychological cost of unemployment per hour.