Question
8. The markup rate ( m ) is 0.05, the expected price level (Pe) is 0.1, the wage setting equation is: W=Pe (1-u) and the
8. The markup rate (m) is 0.05, the expected price level (Pe) is 0.1, the wage setting equation is: W=Pe (1-u) and the price setting equation is: P=91+m)W. Assume that L=1.
A) Calculate the real wage (W/P).
B) Find the AS curve and show it in a graph.
C) Assume now that the expected price level (Pe) is 0.2. Find the new AS curve
D) Show the new AS curve in a graph.
Step by Step Solution
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Step: 1
A To calculate the real wage WP we need to substitute the given equations into each other Given Markup rate m 005 Expected price level Pe 01 Wage sett...
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Macroeconomics
Authors: Robert J Gordon
12th edition
138014914, 978-0138014919
