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Suppose that the price-setting equation also takes into account the price of energy (another input in...
Question 3: (45 marks] Suppose the price-setting equation is given by P= (1 + m)W where...
Question 3: (45 marks] Suppose the price-setting equation is given by P= (1 + m)W where m is the markup. The wage-setting equation is given by W = pe? where z are unemployment benefts and u is the unemployment rate. 1. Derive the real wage and unemployment consistent with equilibrium in the labor market in the medium run. Is this the natural rate of unemployment? Does the equilibrium rate of unemployment change if unemployment benefts decrease? Explain? (8 marks] 2....
Question 3: (45 marks] Suppose the price-setting equation is given by P= (1+mW where m is...
Question 3: (45 marks] Suppose the price-setting equation is given by P= (1+mW where m is the markup. The wage-setting equation is given by W = pe? where z are unemployment benefts and u is the unemployment rate. 1. Derive the real wage and unemployment consistent with equilibrium in the labor market in the medium run. Is this the natural rate of unemployment? Does the equilibrium rate of unemployment change if unemployment benefts decrease? Explain? (8 marks] 2. Draw the...
Suppose that the markup of goods prices over marginal cost is 5%, and the wage-setting equation is W = P(1-u), where u is the unemployment rate. The real wage, as determined by the price-setting equation is _______. The natural rate of unemployment is ___
Suppose that the markup of goods prices over marginal cost is 5%, and the wage-setting equation isW = P(1-u)where u is the unemployment rate.The real wage, as determined by the price-setting equation is _______.The natural rate of unemployment is _______%.
Suppose that the firms' markup over cost is initially 10% and that the wage determination equation...
Suppose that the firms' markup over cost is initially 10% and that the wage determination equation when Pe=P is W = P(1-u) where u = unemployment rate (assume for simplicity, that the catch-all variable z does not enter wage setting). Now suppose that there is a permanent increase in the oil price that increases the markup to 15%. Keeping all else constant, what is the absolute change in the natural level of unemployment (i.e. Un2- Un1 = ?) ? (please...
Part III Answer all questions 1. Suppose the United States economy is represented by the
Part III Answer all questions 1. Suppose the United States economy is represented by the following equations: Z = C + I + G C = 100 + .YD T = 200 I = 30 YD = Y - T G = 100 a) Which variables are endogenous and which are exogenous? -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- b) Calculate equilibrium levels of output, consumption and disposable income -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- c) What is the multiplier for this economy -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- d) What is the effect of increasing G by $100 on Y and the deficit...
Problem 7 Wage setting curve 25-Bargaising gao Price seting curve Employment, N Phillips curves Inaion ()...
Problem 7 Wage setting curve 25-Bargaising gao Price seting curve Employment, N Phillips curves Inaion () bargaining pap ) Inarion () bargaining pap ) epected infation (31 expected infation (5%) U-3% Employment, N mployment at labour market equilibrium no bargaining gap (u-6%) Figure 2: Figure showing how expectations can shift the Phillips curve Copy Figure 2, making sure you leave plenty of space to the left of the 6% unemployment marker. Assume that from an initial position at A, there...
PROBLEM NO 2. An Open Economy in the Short Run and The Medium Run (25 Points)...
PROBLEM NO 2. An Open Economy in the Short Run and The Medium Run (25 Points) a. Indonesia's equilibrium condition of goods and services market can be expressed by the following equation: Y = CAY - T) + (Y, r) +G-IMY, )) { + X(Y*, £) where: Y=domestic output; Y*= foreign output; C= consumption: T=tax; l=investment, r=real interest rate; G=government spending, € = Real Exchange Rate. If it is assumed that the Marshall-Lerner condition holds. Explain in words the effects...
1. Use the Keynesian cross model and show graphically in which direction will equilibrium level of...
1. Use the Keynesian cross model and show graphically in which direction will equilibrium level of income (or output) change. For each of the following, write down the formula for the size of the change of income (i.e. write down the formula for ∆Y): (i) An increase in government purchases (ii) An increase in taxes (iii) An increase in government purchase and an increase in taxes of equal amount (Nb: You must draw a SEPARATE graph for parts (i) and...
1. Consider a firm in the short run, when capital is fixed and the only variable...
1. Consider a firm in the short run, when capital is fixed and the only variable input is labor. For simplicity, we will simply ignore capital. In this situation, suppose that the firm’s production function is given by Q = f(L) = αL – (1/2)L2 , where Q represents the quantity of output produced, L represents the amount of labor employed, and the parameter α is a positive constant. a. Derive this firm’s marginal product of labor function? Under what...
must be newly drawn by hand. Mark penalty imposed if any of these instructions are NOT...
must be newly drawn by hand. Mark penalty imposed if any of these instructions are NOT followed strictly. Question 1(12 marks) Suppose the following is the demand equation of the famous flower shop, Brighten in Hong Kong and the current price charged by Brighteryis $600 for a bunch of roses: Qd = 5000 - 2P where P is the unit price of a bunch of roses and Qd is the quantity demanded (in bunch of roses) (a) Use the midpoint...
Question 3: (45 marks] Suppose the price-setting equation is given by P= (1 + m)W where m is the markup. The wage-setting equation is given by W = pe? where z are unemployment benefts and u is the unemployment rate. 1. Derive the real wage and unemployment consistent with equilibrium in the labor market in the medium run. Is this the natural rate of unemployment? Does the equilibrium rate of unemployment change if unemployment benefts decrease? Explain? (8 marks] 2....
Question 3: (45 marks] Suppose the price-setting equation is given by P= (1+mW where m is the markup. The wage-setting equation is given by W = pe? where z are unemployment benefts and u is the unemployment rate. 1. Derive the real wage and unemployment consistent with equilibrium in the labor market in the medium run. Is this the natural rate of unemployment? Does the equilibrium rate of unemployment change if unemployment benefts decrease? Explain? (8 marks] 2. Draw the...
Problem 7 Wage setting curve 25-Bargaising gao Price seting curve Employment, N Phillips curves Inaion () bargaining pap ) Inarion () bargaining pap ) epected infation (31 expected infation (5%) U-3% Employment, N mployment at labour market equilibrium no bargaining gap (u-6%) Figure 2: Figure showing how expectations can shift the Phillips curve Copy Figure 2, making sure you leave plenty of space to the left of the 6% unemployment marker. Assume that from an initial position at A, there...
PROBLEM NO 2. An Open Economy in the Short Run and The Medium Run (25 Points) a. Indonesia's equilibrium condition of goods and services market can be expressed by the following equation: Y = CAY - T) + (Y, r) +G-IMY, )) { + X(Y*, £) where: Y=domestic output; Y*= foreign output; C= consumption: T=tax; l=investment, r=real interest rate; G=government spending, € = Real Exchange Rate. If it is assumed that the Marshall-Lerner condition holds. Explain in words the effects...
must be newly drawn by hand. Mark penalty imposed if any of these instructions are NOT followed strictly. Question 1(12 marks) Suppose the following is the demand equation of the famous flower shop, Brighten in Hong Kong and the current price charged by Brighteryis $600 for a bunch of roses: Qd = 5000 - 2P where P is the unit price of a bunch of roses and Qd is the quantity demanded (in bunch of roses) (a) Use the midpoint...
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