Determine as a simple mark-up over expected wages

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Reference no: EM13181492

Suppose prices are determined as a simple mark-up over expected wages: p-w^e=a0-a1U

Assume further that wages are a simple mark-up over expected prices: w-p^e=B0-B1U

Use the equations above to show that when prices are different from price expectations, actual unemployment is different from the natural rate of unemployment.

Reference no: EM13181492

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