Discuss the concept of the equilibrium (or "natural") rate of unemployment in a model with imperfect markets. Show how an increase in the mark-up over costs affects the equilibrium (or "natural") rate of unemployment and real wages. (2 marks) b) Briefly describe the Taylor Rule in setting interest rates. Explain when and why the Reserve Bank of Australia has taken a contractionary monetary policy stance in recent years. (4 marks) c) "A real depreciation increases net exports only if the Marshall-Lerner condition holds." Explain the Marshall-Lerner condition and how it relates to the 'J-curve' effect. (4 marks)