3. Suppose that the markup of goods prices over costs is 10%, and that the wage setting equation is W = P (1-u), where u is the unemployment rate. a. Find the natural rate of unemployment. b. There is no guarantee that the expected price level equals the actual price level in the short run. If the expected price level is higher than the actual price level, what will happen to the unemployment rate? Explain.

3. Suppose that the markup of goods prices over costs is 10%, and that the wage setting equation is W = P (1-u), where u is the unemployment rate. a. Find the natural rate of unemployment. b. There is no guarantee that the expected price level equals the actual price level in the short run. If the expected price level is higher than the actual price level, what will happen to the unemployment rate? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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