Question
Consider the following representation of the labour market in an economy where the WS curve is given by: W=3/8 pe (1+z-u) The production function is
Consider the following representation of the labour market in an economy where the WS curve is given by:
W=3/8 pe (1+z-u)
The production function is Y=N and the nominal wage is W. The markup is u=1 and z=1
Assume now that the production function becomes Y=3/2 N (so to produce 1 unit of output 2 only 2/3 of units of labour are needed). How do the the natural rate of unemployment and the equilibrium real wage change?
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Basic Economics
Authors: Frank V. Mastrianna
16th edition
1111826641, 978-0357706664, 978-1111826642
