The salary curve is given by: W pe = A W (u, zw) ▪ The price curve is given by: P = (1 + price surcharge) marginal cost WO A P = (1+μ). a) Explain how unemployment (u) and expected price level (P^ e) affect nominal wages and expected real wages. Give an interpretation of the variable z^ w?
The salary curve is given by: W pe = A W (u, zw) ▪ The price curve is given by: P = (1 + price surcharge) marginal cost WO A P = (1+μ). a) Explain how unemployment (u) and expected price level (P^ e) affect nominal wages and expected real wages. Give an interpretation of the variable z^ w?
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter21: Unemployment
Section: Chapter Questions
Problem 35CTQ: While unemployment is highly negatively correlated with the level of economic activity, in the real...
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Book: Macroeconomic
Steinar, holden, oslo
Cappelen damm academic,2016
![The salary curve is given by:
= A° · W (u,z")
ре
The price curve is given by: P = (1+ price surcharge) · marginal cost
w
P = (1+ µ) ·
A
-
a) Explain how unemployment (u) and expected price level (P ^ e) affect nominal wages
and expected real wages. Give an interpretation of the variable z^ w?
b) Draw both the price and wage curve in a diagram where real wages (W / P) are on the
Y-axis and unemployment (u) is on the X-axis. Explain why the real wage in this
model is not dependent on unemployment [Hint: Expected price is not the same as
actual price. P^e # P]
c) Take the figure in b) as a starting point and explain what we mean by equilibrium and
equilibrium unemployment in price and wage setting.
d) How will these cases affect the equilibrium in the figure in problem c?
1) Increased unemployment benefits
2) Increased productivity](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffaf1b24a-5495-40ab-b764-f1a500d2dd95%2F5e0292d9-8672-4324-ac5e-ca9a54272c5a%2Fraig9a_processed.png&w=3840&q=75)
Transcribed Image Text:The salary curve is given by:
= A° · W (u,z")
ре
The price curve is given by: P = (1+ price surcharge) · marginal cost
w
P = (1+ µ) ·
A
-
a) Explain how unemployment (u) and expected price level (P ^ e) affect nominal wages
and expected real wages. Give an interpretation of the variable z^ w?
b) Draw both the price and wage curve in a diagram where real wages (W / P) are on the
Y-axis and unemployment (u) is on the X-axis. Explain why the real wage in this
model is not dependent on unemployment [Hint: Expected price is not the same as
actual price. P^e # P]
c) Take the figure in b) as a starting point and explain what we mean by equilibrium and
equilibrium unemployment in price and wage setting.
d) How will these cases affect the equilibrium in the figure in problem c?
1) Increased unemployment benefits
2) Increased productivity
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