Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 11, Problem 5NP
a.
To determine
To derive: The equation that provides a relation between the real wage and the amount of labor demanded by the firms.
b.
To determine
For the nominal wage of 20, derive the relation between price level and the amount of labor demanded by firms.
c.
To determine
To describe: The relationship between price level and the amount of output supplied by the firms and put it on the graph.
Supposing that the IS and LM curves of the economy (the goods market and the asset
e.
To determine
To derive: The relationship between output, Y and P. Graph it on the same axis as the relationship between the price level and the amount of output supplied by firms, the
e.
To determine
To derive: The equilibrium values of price level, output, real wage, real interest rate, and employment.
f.
To determine
To describe: The equilibrium values of price level, output, employment, real wage and real interest rate if M is 135.
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Students have asked these similar questions
Assume that an economy's production function is Y=1,000L1/2,so that when the marginal product of capital is equated to the real wage the labor demand curve is L = 250,000(P/W)2. The labor supply curve is L = 31,250(W/P). The real wage that solves these equations is W/P = 2. Assume that the expected price level is 10, so that a nominal wage contract setting the wage at 20 is agreed to, making the expected real wage 2. If the price level turns out to be 10, 62,500 workers will be hired and output will be 250,000.
If the actual price level turns out to be 20, what will the actual real wage be?b. According to the labor demand curve, how much labor will be demanded if the actual real wage is at the level given in part a?c. According to the production function, if the amount of labor given in part b is actually hired, how much will production be?
Suppose that a consulting firm has generated the following information about the economy of Growville:
(i) The current employment in export industries is 50,000;
(ii) The current total employment in the city is 150,000;
(iii) Export employment is expected to grow by 10,000 jobs.
a. Is there enough information to accurately predict the effect of the increase in export employment on total employment?
b. If you have enough information, predict the employment effect and illustrate your answer with a graph.
c. If there is insufficient information, proceed with the analysis as far as you can and list the additional information you need to complete the analysis. Illustrate your answer with a graph.
Suppose that all other factors affecting the labor market remain
constant.
Graphically illustrate and explain what is the effect of an increase
in unemployment benefits on the equilibrium levels of real wage
and unemployment. (Hint: In your graph, put the real wage on the
vertical axis, and the level of unemployment on the horizontal axis.
Use wage-setting relation and price-setting relation to analyze the
question.)
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