Q1. Use the WS (wage-setting) and PS (price-setting) relations to examine the effects of the following events on the natural rate of unemployment and on the real wage. Be sure to explain the effects of each event on the WS and PS relations and draw a graph. (a) A reduction in unemployment benefits. (b) Less stringent anti-trust enforcement. (c) An increase in the minimum wage. (d) Suppose that the firms' markup over cost is 10%, and that the wage determination equation is W=P (1-u). What is the natural rate of unemployment?
Q1. Use the WS (wage-setting) and PS (price-setting) relations to examine the effects of the following events on the natural rate of unemployment and on the real wage. Be sure to explain the effects of each event on the WS and PS relations and draw a graph. (a) A reduction in unemployment benefits. (b) Less stringent anti-trust enforcement. (c) An increase in the minimum wage. (d) Suppose that the firms' markup over cost is 10%, and that the wage determination equation is W=P (1-u). What is the natural rate of unemployment?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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