Independence of the Aggregate Price-Setting Real Wage from Employment
In the price-setting model, the assumption that all firms are identical and make the same pricing decisions leads to a key conclusion: the aggregate real wage () is a constant share of the average output per worker. This means the price-setting real wage is not affected by the overall level of employment in the economy.
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Introduction to Macroeconomics Course
Ch.1 The supply side of the macroeconomy: Unemployment and real wages - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
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Firm's Profit Share per Worker in the Price-Setting Model
Constancy of the Price-Setting Real Wage with Respect to Employment
Impact of Higher Productivity on the Price-Setting Curve
Figure 1.22: Determinants of the Price-Setting Real Wage
Real Profit per Worker in the Price-Setting Model
In an economy where the real wage is determined as a fixed share of the output produced per worker, consider a scenario where a widespread technological innovation increases the amount of output each worker can produce. If the proportional division of output between wages and firm profits remains unchanged, what is the most likely outcome for the real wage?
Policy Impact on Real Wages
In an economy where the aggregate real wage is determined as a constant share of the output per worker, imagine the government enacts new policies that significantly increase the level of competition among firms. Assuming the output per worker remains unchanged, what is the most likely impact on the aggregate real wage?
Calculating the Aggregate Real Wage
Independence of the Aggregate Price-Setting Real Wage from Employment
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An economy experiences a large influx of new workers, leading to a significant increase in the total number of people employed. Despite this change, the average output produced per worker and the typical profit share that firms retain from the price of each good remain constant. Based on the price-setting behavior of firms, what is the expected impact on the aggregate real wage (the purchasing power of the average wage)?
Evaluating Economic Policies
Employment Levels and the Price-Setting Real Wage
In an economy where firms set prices as a markup over their costs, a government policy that successfully doubles the number of people employed will, by itself, lead to a decrease in the aggregate price-setting real wage.
Evaluating a Policy Argument on Real Wages