Does the natural rate of unemployment depend on productivity

Reference no: EM131145687

Suppose an economy is characterized by the equations below.

a. Solve for the unemployment rate if Pe = P but Ae does not necessarily equal A. Explain the effects of (Ae /A) on the unemployment rate. Now suppose that expectations of both prices and productivity are accurate.

b. Solve for the natural rate of unemployment if the markup (m) is equal to 5%.

c. Does the natural rate of unemployment depend on productivity? Explain.

Reference no: EM131145687

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