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Q. Explain the labor market in the cross model?
In cross model, both P and W are exogenous andconstant. Hence real wage is constant and it is not essentially equal to the equilibrium real wage. Model of the labor market in the cross model can be explained by the below figure:
Figure: The labor market in the cross model
While referring to the "EYE on YOUR LIFE" section on page 389 of the textbook, discuss the change in the U.S. unemployment rate and inflation rate over the past year based on the P
x=40-0.2p where x=x1+x2 c1=50+2x1+0.5x1 c2=100+10x2
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