Task 1 The salary curve is given by: W pe A. W (u, The price curve is given by: P = (1 + price surcharge) · marginal cost W A P = (1 +μ).. a) Explain how unemployment (u) and expected price level (P^e) affect nominal wages and expected real wages. Give an interpretation of the variable z ^ w? b) Draw both the price and wage curve in a diagram where real wages (W/P) are on the Y-axis and unemployment (u) is on the X-axis. Explain why the real wage in this

Task 1 The salary curve is given by: W pe A. W (u, The price curve is given by: P = (1 + price surcharge) · marginal cost W A P = (1 +μ).. a) Explain how unemployment (u) and expected price level (P^e) affect nominal wages and expected real wages. Give an interpretation of the variable z ^ w? b) Draw both the price and wage curve in a diagram where real wages (W/P) are on the Y-axis and unemployment (u) is on the X-axis. Explain why the real wage in this

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter21: Unemployment

Section: Chapter Questions

Problem 11RQ: If you an? out of school but working part time, are you considered employed or unemployed in U.S....

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Unemployment rates have been higher in many European countries in recent decades than in the United States. Is the main reason for this long-term difference in unemployment rates more likely to be cyclical unemployment or the natural rate of unemployment? Explain briefly.
If you an? out of school but working part time, are you considered employed or unemployed in U.S. labor statistics? If you are a full time student and working 12 hours a week at the college cafeteria are you considered employed or not in the labor force? If you are a senior citizen who is collecting social security and a pension and working as a greater at Wal-Mart are you considered employed or not in the labor force?
Task 1 The salary curve is given by: W pe = ) A° · W (u, z" ре The price curve is given by: P = (1+ price surcharge) · marginal cost P = (1+ µ) . A a) Explain how unemployment (u) and expected price level (P ^ e) affect nominal wages and expected real wages. Give an interpretation of the variable z^ w? b) Draw both the price and wage curve in a diagram where real wages (W / P) are on the Y-axis and unemployment (u) is on the X-axis. Explain why the real wage in this model is not dependent on unemployment [Hint: Expected price is not the same as actual price. P^ e + P] c) Take the figure in b) as a starting point and explain what we mean by equilibrium and equilibrium unemployment in price and wage setting. d) How will these cases affect the equilibrium in the figure in problem c? 1) Increased unemployment benefits 2) Increased productivity
Complete the following labor supply table for a firm hiring labor competitively: Total Labor Cost Marginal Resource (Labor) Cost Marginal Revenue Product Units of Labor Wage Rate $14 14 $38 2 14 28 3 14 24 4 14 20 5 14 14 6 14 10 a. Show graphically this firm's labor supply and marginal resource (labor) cost curves. Instructions: (1) Use the tool provided 'MRC' to draw the marginal resource cost curve (plot 6 polnts total). (2) Use the tool provided 'MRP' to draw the marginal revenue product curve (plot 6 polnts total). To earn full credit for this graph, you must plot all required polnts for each curve. Тools MRC MRP 1. 3 4 5 6 7 Quantity of labor Wage rate (dollars)
10 DRAW A GRAPH. WITHOUT GRAPH THUMBS DOWN!Suppose the markup of goods prices over marginal cost is 2% and the wage-setting equation is W=P(1-u) with u being the unemployment rate.1. What is the Natural level on Unemployment?2. What is the real wage as determined by the price setting equation?3. If the markup increases to 2.5% due to an increase in the price of Oil what happens to the natural rate of employment? Explain briefly and graphically this change.
Consider an economy that experiences an outflow of working age people and a decline in aggregatelabour supply as a result. Suppose the aggregate labour demand curve is not affected by this change.(a) Explain, with the aid of the labour-market-equilibrium diagram, how this will affect the equilibriumreal wage and the full-employment level of employment. (b) Explain, with the aid of three separate IS-LM-FE diagrams, how this will affect real output, realinterest rate and the general price level in three steps:(i) before the general price level adjusts;(ii) when the general price level is adjusting;(iii) after the price adjustment process is completed.Is the general price level increasing or decreasing during the price adjustment process? Explain theintuition of your answer with reference to the AD-AS framework.
Part B Consider an economy that experiences an outflow of working age people and a decline in aggregatelabour supply as a result. Suppose the aggregate labour demand curve is not affected by this change.(a) Explain, with the aid of the labour-market-equilibrium diagram, how this will affect the equilibriumreal wage and the full-employment level of employment. (b) Explain, with the aid of three separate IS-LM-FE diagrams, how this will affect real output, realinterest rate and the general price level in three steps:(i) before the general price level adjusts;(ii) when the general price level is adjusting;(iii) after the price adjustment process is completed.Is the general price level increasing or decreasing during the price adjustment process? Explain theintuition of your answer with reference to the AD-AS framework.
See the labor market graph directly below. If there is a sticky wage of $20, what is the unemployment rate in this labor market? 20 on 16 16 12 A Labor Market 160 15.00% 8.57% 9.38% >0% 10.00% 16.00% Although the graph does not present complete labels, standard labor market labels apply. Note: graph is not to scale. 175 (millions)
A6 Show that the real wage implied by price-setting behaviour is a constant fraction of the marginal product of labour. How does this share vary with the intensity of product market competition? Explain intuitively.
Between January 20JO and Janual'}• 2016, U.S.employment increased by 12.1 million workers, butthe number ol unemployed workers declined by mlly7.3 million. How are these numbers ronsistent witheach other? V.'hy might one expect a reduction in thenumber of people rounted as unemployed lo be smaUerthan the increase in the number of people employed?
Explain the difference between nominal and real wages..
Real wage Cabor supply Labor (hours) Preferences Time preference: 100 O A flattening of the labor supply curve due to a higher labor supply elasticity OA steepening of the labor supply curve due to a lower labor supply elasticity Smoothing: 100 Will to substitute: 105 Consumption weight: 10 Prices and assets Initial assets: 100 Wage rate: 100 Interest rate: 100 Price level: 100 Inflation rate: 100 The following question will be about the labor supply curve. Remember, the labor supply curve plots hours worked on the x-axis and the real wage on the y-axis. Which of the following would happen as a result of an increase in households' willingness to substitute between consumption and leisure? O An upward movement along the curve and an increase in the log of hours worked O A downward movement along the curve and a decrease in the amount of hours worked O None of these