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Questions › DSE › DSE 2019 › Q24
0 marksMacroeconomics › Inflation, unemployment and the Phillips curve › The natural rate of unemployment and NAIRUModerateabout 2 min

DSE 2019 Question 24: Inflation, unemployment and the Phillips curve

The price-setting relation gives the real wage as WP=A1+m\dfrac{W}{P}=\dfrac{A}{1+m}PW​=1+mA​ (technology AAA, mark-up mmm). The wage-setting relation gives WP=A(1−u)\dfrac{W}{P}=A(1-u)PW​=A(1−u) (productivity AAA, unemployment uuu). The effect of an increase in the level of technology on unemployment is:

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The price-setting relation gives the real wage as W/P=A/(1+m) (technology A, mark-up m). The wage-setting relation gives W/P=A(1-u) (productivity A, unemployment u). The effect of an increase in the level of technology on unemployment is: (A) Ambiguous (B) Zero (C) Positive (D) Negative

Inflation, unemployment and the Phillips curve has come up 106 times in 7 exams since 2006.

What this question tests

This question is on The natural rate of unemployment and NAIRU, part of Inflation, unemployment and the Phillips curve in Macroeconomics.

The unemployment rate consistent with stable inflation and what determines it.

TestStop has 19 past-paper questions on this subtopic.

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Question from the DSE 2019 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.