Book: MacroeconomicSteinar, holden, osloCappelen damm academic,2016 The salary curve is given by:= A° · W (u,z")реThe price curve is given by: P = (1+ price surcharge) · marginal costwP = (1+ µ) ·A-a) Explain how unemployment (u) and expected price level (P ^ e) affect nominal wagesand 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 theY-axis and unemployment (u) is on the X-axis. Explain why the real wage in thismodel is not dependent on unemployment [Hint: Expected price is not the same asactual price. P^e # P]c) Take the figure in b) as a starting point and explain what we mean by equilibrium andequilibrium unemployment in price and wage setting.d) How will these cases affect the equilibrium in the figure in problem c?1) Increased unemployment benefits2) Increased productivity

The purpose of this question is to show the real wages adjust to expected price changes. The…

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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Question

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

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