Use the following table to answer the questions below. This table shows the supply and demand for labor in an economy.

a. What is the real wage (W/P) at full employment?

b. If workers expect a price level of 200 (i.e., P = 2.00), what money wage (W) will they want?

c. If workers expect a price level of 200 (and are paid the money wage from

(b) above), then what actual price level will cause firms to hire 115 units of labor?

d. If workers come to expect the price level in

(c) above, what wage will they demand? What will happen to output?

Transcribed Image Text:

4 5 6 7 8 Real Wage 70 80 90 100 110 Labor Supply 130 115 90 75 60 Labor Demand