Show how an increase in productivity of workers affects real wages and employment using a standard supply and demand model of the labour market as discussed in lecture/textbook.

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 28RQ: After several years of economic growth, would you expect the unemployment in an economy to be mainly...
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(i) Show how an increase in productivity of workers affects real wages and employment using a standard supply and demand model of the labour market as discussed in lecture/textbook.

4

(ii) Define the natural rate of unemployment. Use Okun’s law to show what happens to cyclical unemployment when output is equal to potential output. Provide a brief explanation supporting your answer.

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