Two island economies, Cocoa Island and Plantation Island, are identical in every respect except one. A survey
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Two island economies, Cocoa Island and Plantation Island, are identical in every respect except one. A survey tells us that at full employment, people on Cocoa Island spend 1,000 hours a day on job search, while the people on Plantation Island spend 2,000 hours a day on job search. Which economy has the greater level of potential GDP? Which has the higher real wage rate? And which has the higher natural unemployment rate?
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