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Suppose the markup of goods prices over marginal cost is 20% and the wage-setting equation is W=P(i-u) with u being the unemployment rate. a. What

Suppose the markup of goods prices over marginal cost is 20% and the wage-setting equation is W=P(i-u) with u being the unemployment rate.

a. What is the Natural level on Unemployment?

b. What is the real wage as determined by the price setting equation?

c. If the markup decreases to 10%, what happens to the natural rate of employment? EXPLAIN.

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