Suppose that the markup of goods prices over marginal cost is 8%, and that the wage-setting equation is W=P(10.5u), where u is the unemployment rate. a. [1.5 marks] What is the real wage, as determined by the price-setting equation? b. [1.5 marks] What is the natural rate of unemployment? c. [2 marks] Suppose the unemployment benefits increase. What happens to the natural rate of unemployment? Explain the logic behind your answer. d. [3 marks] Suppose the oil price drops due to an increase in the stock of proven reserves of oil. Assume that the IS curve does not shift in the short run, and that the centr bank does not change the interest rate in the short run but can do so in the medium run. What will happen to the PC curve? What will happen to the IS curve and LM curve, respectively, in the medium run? What will happen to the output in the short run and the medium run? Explain your answer in words. Suppose that the markup of goods prices over marginal cost is 8%, and that the wage-setting equation is W=P(10.5u), where u is the unemployment rate. a. [1.5 marks] What is the real wage, as determined by the price-setting equation? b. [1.5 marks] What is the natural rate of unemployment? c. [2 marks] Suppose the unemployment benefits increase. What happens to the natural rate of unemployment? Explain the logic behind your answer. d. [3 marks] Suppose the oil price drops due to an increase in the stock of proven reserves of oil. Assume that the IS curve does not shift in the short run, and that the centr bank does not change the interest rate in the short run but can do so in the medium run. What will happen to the PC curve? What will happen to the IS curve and LM curve, respectively, in the medium run? What will happen to the output in the short run and the medium run? Explain your answer in words