Suppose that the mark-up over cost is 20% for a representative firm in an economy with labour being the single factor; and the wage-setting equation is (where is the unemployment rate, is price and is the wage rate). Then the natural rate of unemployment is:
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Suppose that the mark-up over cost is 20% for a representative firm in an economy with labour being the single factor; and the wage-setting equation is W=P(1-u) (where u is the unemployment rate, P is price and W is the wage rate). Then the natural rate of unemployment is: (A) 10% (B) 20% (C) 13% (D) 17%
Inflation, unemployment and the Phillips curve has come up 106 times in 7 exams since 2006.
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.
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Question from the DSE 2019 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.