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Author Question: Which of the following conditions will occur when two countries are engaged in a credible, fixed ... (Read 21 times)

imanialler

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on: Jun 30, 2018
Which of the following conditions will occur when two countries are engaged in a credible, fixed exchange rate regime?
 
  A) E = 1
  B) E > 1
  C) i = i
  D) E < 1

Question 2

Explain what effect a reduction in the unemployment rate will have on the real wage based on: (1 ) the WS relation; and (2 ) the PS relation.
 
  What will be an ideal response?


juwms

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Reply #1 on: Jun 30, 2018
Answer to Question 1

C

Answer to Question 2

A reduction in the unemployment rate will increase bargaining power, increase the nominal wage, and therefore increase the real wage based on wage setting behavior. Changes in the unemployment rate have no effect on the real wage based on price setting behavior.


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