MacroeconomicsChapter 6select

MacroeconomicsChapter 6select - ANSWERS TO END-OF-CHAPTER...

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ANSWERS TO END-OF-CHAPTER PROBLEMS CHAPTER 6 Quick Check 1. d. True. e. False. f. Uncertain/False. The degree of bargaining power depends on the nature of the job and the employee’s skills. g. True. h. False. 3. a. W/P=1/(1+ μ )=1/1.05=.952 b. Wage setting: u=1-W/P=4.8% c. W/P=1/1.1=.91; u=1-.91=9%. The increase in the markup lowers the real wage. Algebraically, from the wage-setting equation, the unemployment rate must rise for the real wage to fall. So the natural rate increases. Intuitively, an increase in the markup implies more market power for firms, and therefore less production, since firms will use their market power to increase the price of goods by reducing supply. Less production implies less demand for labor, so the natural rate rises. Dig Deeper 4. a. Answers will vary. b-c. Most likely, the difference between your actual wage and your reservation wage will be higher for the job you will have ten years later. d.
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This note was uploaded on 12/22/2011 for the course MACROECON 301 taught by Professor Christinanagy during the Fall '09 term at University of Washington.

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MacroeconomicsChapter 6select - ANSWERS TO END-OF-CHAPTER...

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