Re: price setting and wage setting

Posted by tim on Jun 18, 2012; 7:04am
URL: http://discussion-forum.276.s1.nabble.com/price-setting-and-wage-setting-tp7577966p7578070.html

suppose the following eqn holds for an ecoy, at every time t :
Pt=(1+a)WtNt/Yt
that is the pricce of  output  is  a fixed markup over the unit labor cost. let pe be the inflation rate  and, lamda be the rate of growth in laboor productivity. (labor  productivity = Yt/Nt). which of the following is true ?
1. w=pi - lamda
2. pi=w + lamda
3. pi=w - lamda
4. w= lamda - pi