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What is the natural rate of unemployment? Use the price-setting, wage-setting models of thelabour market to show what factors might cause it to be higher in one country than in another.
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What is the natural rate of unemployment? Use the price-setting, wage-setting models of the labour market to show what factors might cause it to be higher in one country than in another. The natural rate of unemployment occurs when both the equilibriums in the wage-setting curve and the price-setting curve coincide. It means that the real wages set by producers and bargained for by employees are exactly the same. It is defined as the rate at which there is a real wage equilibrium. Real wages are determined by the interaction between the wage-setting and the price-setting curves. Wages set by workers usually through process of collective or individual bargaining is determined in the wage-setting model, while the wages set by producers are determined in the price-setting model. The wage-setting model of the equation W/P = F( u, z) shows how real wages, W/P are influenced by different factors, u, which...
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