With technology ( productivity, labour), a firm sets price at a constant mark-up over effective unit wage cost . Workers' expected real wage is with and the expected price. If the price expected by workers equals the actual price, the effect of a rise in productivity on unemployment is
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With technology Y=AL (A productivity, L labour), a firm sets price at a constant mark-up μ over effective unit wage cost W/A. Workers' expected real wage is W/P^e=A^α(1-u)^(1-α) with 0<α<1 and P^e the expected price. If the price expected by workers equals the actual price, the effect of a rise in productivity A on unemployment is (A) positive (B) negative (C) zero (D) ambiguous
Also written as: With technology Y=AL (A productivity, L labour), a firm sets price at a constant mark-up mu over effective unit wage cost W/A. Workers' expected real wage is W/P^e=A^(alpha)(1-u)^(1-alpha) with 0<alpha<1 and P^e the expected price. If the price expected by workers equals the actual price, the effect of a rise in productivity A on unemployment is
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 2020 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.