a. Why does the wage-setting relation in Figure 1 have an upward slope? As N approaches L, what happens to the unemployment rate? b. The price-setting relation is horizontal. How would an increase in the mark-up affect the position of the price- setting relation in Figure 1? How would an increase in the mark-up affect the natural rate of unemployment in Figure 12
a. Why does the wage-setting relation in Figure 1 have an upward slope? As N approaches L, what happens to the unemployment rate? b. The price-setting relation is horizontal. How would an increase in the mark-up affect the position of the price- setting relation in Figure 1? How would an increase in the mark-up affect the natural rate of unemployment in Figure 12
Chapter1: Making Economics Decisions
Section: Chapter Questions
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![Problem 1) Read Chapter 7's Appendix on Page 154 of the textbook. Then answer questions below:
a. Why does the wage-setting relation in Figure 1 have an upward slope? As N approaches L, what happens to the
unemployment rate?
b. The price-setting relation is horizontal. How would an increase in the mark-up affect the position of the price-
setting relation in Figure 1? How would an increase in the mark-up affect the natural rate of unemployment in
Figure 1?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd705b2cc-2d8a-4a5a-993e-1054b2f5e267%2F422739ba-08ee-4c9d-a7cd-e2e714544a15%2Fne17zo_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 1) Read Chapter 7's Appendix on Page 154 of the textbook. Then answer questions below:
a. Why does the wage-setting relation in Figure 1 have an upward slope? As N approaches L, what happens to the
unemployment rate?
b. The price-setting relation is horizontal. How would an increase in the mark-up affect the position of the price-
setting relation in Figure 1? How would an increase in the mark-up affect the natural rate of unemployment in
Figure 1?
![Real wage, W/P
1
1+m
N
A
Wage
setting
u
N₂
Employment, N
L
Price
setting](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd705b2cc-2d8a-4a5a-993e-1054b2f5e267%2F422739ba-08ee-4c9d-a7cd-e2e714544a15%2Fhwqk8q_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Real wage, W/P
1
1+m
N
A
Wage
setting
u
N₂
Employment, N
L
Price
setting
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