<p>Equilibrium should be found equaling price and wage setting equations together. In your case that would be:</p>
<p><span class="math-container">$$\frac{1}{1+\mu} = z(1-u)$$</span></p>
<p>where <span class="math-container">$\mu$</span> is markup, and filling in the parameters you will find that <span class="math-container">$u$</span> should be:</p>
<p><span class="math-container">$$\frac{1}{1+0.11} = 1(1-u)$$</span></p>
<p><span class="math-container">$$u\approx 0.099$$</span></p>
<p><span class="math-container">$0.099$</span> can be rounded to 10%, but it is not 1/9 which would be close to 11%.</p>

CC BY-SA 4.0
2024-01-10T16:25:16.267Z
2024-01-10T16:25:16.267Z
WilliamT
<p>I'm currently doing multiple choice questions and cant figure this question out. I keep getting 1/9 as an answer when its meant to be 10%. Any help would be great. Thanks</p>
<p>Suppose that the mark-up of prices over nominal wages is 11. 1̇% (i.e. 1 9⁄ ), and thatthe wage-setting equation is  = (, ) = (1 − ), where u is the unemploymentrate. If  = 1 what is the equilibrium level of unemployment?</p>

<macroeconomics><unemployment><linear-algebra>
Wage setting equation
Jack
# Wage setting equation

(Asked by: username_0 on 2024-01-10)

I'm currently doing multiple choice questions and cant figure this question out. I keep getting 1/9 as an answer when its meant to be 10%. Any help would be great. Thanks

Suppose that the mark-up of prices over nominal wages is 11. 1̇% (i.e. 1 9⁄ ), and thatthe wage-setting equation is = (, ) = (1 − ), where u is the unemploymentrate. If = 1 what is the equilibrium level of unemployment?

**Tags:** macroeconomics, unemployment, linear-algebra

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## 1 answers

### Answer by username_1 on 2024-01-10. Score: 2

Equilibrium should be found equaling price and wage setting equations together. In your case that would be:

$$\frac{1}{1+\mu} = z(1-u)$$

where $\mu$ is markup, and filling in the parameters you will find that $u$ should be:

$$\frac{1}{1+0.11} = 1(1-u)$$

$$u\approx 0.099$$

$0.099$ can be rounded to 10%, but it is not 1/9 which would be close to 11%.


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