Question

In: Economics

1.     Suppose the United States economy is represented by the following equations: Z = C + I...

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

Suppose that the wage and price setting relations are given by

W = Pe(1-u)

P = (1+μ) W

a.      If P = Pe and the mark-up is 20% find the real wage

b.     Calculate the natural rate of unemployment

c.      Calculate the real wage and the natural rate of unemployment if the mark-up decreases to 10%

d.     Now if P ≠ Pe and Pe =105, but markup is still 20%, what unemployment rate is compatible with the price level = 100?

e.      Derive the aggregate supply if the production function is Y = N

Solutions

Expert Solution

Rahul Sunny answered 2 years ago
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