The labour market in an economy is characterised by the following equations: Wage setting: Price setting: W W p =0.9-0.5u = 11 In which Wis nominal wages, pe and P are expected nominal prices and nominal prices, respectively, u is level of unemployment. u is the price mark-up and A is the marginal product of labour. Assume μ = 0.3 and λ = 1.1 Considering this information, which of the following statements are CORRECT: Improvement in working conditions will have no effects in the equilibrium level of unemployment in this economy. If this economy's actual output is below its potential output, there is pressure for real wages to decrease below 0.85 (i.e., W<0.85). If price marginal product of labour decreases to 1, the equilibrium real wage in this economy will decrease. A positive demand shock will change the equilibrium variables in this economy.

The labour market in an economy is characterised by the following equations: Wage setting: Price setting: W W p =0.9-0.5u = 11 In which Wis nominal wages, pe and P are expected nominal prices and nominal prices, respectively, u is level of unemployment. u is the price mark-up and A is the marginal product of labour. Assume μ = 0.3 and λ = 1.1 Considering this information, which of the following statements are CORRECT: Improvement in working conditions will have no effects in the equilibrium level of unemployment in this economy. If this economy's actual output is below its potential output, there is pressure for real wages to decrease below 0.85 (i.e., W<0.85). If price marginal product of labour decreases to 1, the equilibrium real wage in this economy will decrease. A positive demand shock will change the equilibrium variables in this economy.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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if a worker receives a raise in their nominal wage from $10 t0 $15 per hour at the same time the price level doubles, the worker's real rage has approximately: A: increased by 50% B: Incerased by 100% C: dECREASED BY 50% D: Decreased by 33% with explanation
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Book: MacroeconomicSteinar, holden, osloCappelen damm academic,2016