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What is the natural rate of unemployment

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Reference no: EM131249635

Suppose that the markup of Goods prices over marginal cost is 5% and that the wage-setting equation isn W = P ( 1 - u ), where u is the unemployment rate

a. What is the real wage, as determined by the price-setting equation?

b. What is the natural rate of unemployment?

c. Suppose that the markup of prices over costs increases to 10%. What happens to the natural rate of unemployment? Explain.

Reference no: EM131249635

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