Exploring Macroeconomics
8th Edition
ISBN: 9781544337722
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 19, Problem 7P
To determine
(a)
To explain:
The impact on real wage if nominal wages rise more than output price.
To determine
(b)
To explain:
The effect of change in real wage on
To determine
(c)
To explain:
The effect of change in real wage on SRAS.
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Students have asked these similar questions
a. What is the theorized relationship between the unemployment rate and the minimum wage in the static model of the labour market?
b. How should the unemployment rate respond to a constant minimum wage in the static model of the labour market?
What is the relationship between unemployment and the price level in the short run?
Figure 15-12
Price level
LRAS, LRAS₂
B
*
$10
104
100
Thr
AD₁
11 11.3
SRAS,
SRAS₂
AD₂
Real GDP
Refer to Figure 15-12. In the dynamic AD-AS model, if the
economy is at point A in year 1 and is expected to go to
point B in year 2, and the Federal Reserve pursues no policy,
then at point B
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Similar questions
- A decrease in the level of output will cause the following events on the labour market: Select one: a. The level of unemployment decreases causing an increase in the bargaining position of workers which enables them to bargain for a nominal wage increase. b. The natural level of unemployment increases causing a decrease in the bargained real wage. c. The level of unemployment increases which causes a decline in the bargaining position of workers resulting in a lower bargained nominal wage. d. The natural level of unemployment decreases causing an increase in the bargained real wage.arrow_forwardIn the short-run, some costs are flexible and others, such as labor, are rigid. What does the rigidity in labor markets create? Which type/source of unemployment does this affect?arrow_forwardLet's say the inflation rate in an economy turns out to be higher than expected. Will the following people, or bank, be affected? Helped, hurt, or unaffected? a. Someone keeping a large quantity of cash in a shoe box in their closet. b. A bank lending money at a fixed rate of interest c. A union member with a COLA wage contract d. A person who is not due to receive a pay raise for another 11 monthsarrow_forward
- The next note that changes in oil prices can affect the inflation-unemployment outcome. Explain what effect changes in oil prices may have on these two variables.arrow_forwardBecause of global warming, Winterland got flooded, the corn crops that they're planting are destroyed completely. What is the effect on the short run tradeoff between inflation and unemployment, ilustrate it!?arrow_forwardWhile unemployment is highly negatively correlated with the level of economic activity, in the real world it responds with a lag. In other wands, firms do not immediately lay off workers in response to a sales decline. They wait a while before responding. Similarly, firms do not immediately hire workers when sales pick up. What do you think accounts for the lag in response time?arrow_forward
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