Suppose that the firms' markup over cost is 10% and that the wage determination equation when...
Suppose that the firms' markup over cost is 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).
What is the natural rate of unemployment?
(please answer in the form 0.xxxx (which 4 digital places), e.g. 0.1234 representing 12.34%)
Homework Answers
Mark up cost = 10%
Wage determination equation when Pe = P
W = P(1-u)
Price setting equation, 
Here value of 
Wage setting equation, W = P(1 -u)
Natural rate of unemployment = 9.09%
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Suppose that the firms' markup over cost is 10% and that the
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Suppose that the markup of goods prices over marginal cost is 5%, and that the wage-setting equation is W = P(1 - u), where u is the unemployment rate. Suppose that the markup of prices over costs increases to 10%. The natural rate of unemployment is now 9.1 %. (Round your response to one decimal place.) Which of the following best explains why the increase in the markup causes the natural rate of unemployment to rise? O A. It shifts...
Please help with C and D. Thank
You.
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