6. (10 points) In Keynesian theory, labor demand is determined by expected production, and the real wage rate is determi

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6 10 Points In Keynesian Theory Labor Demand Is Determined By Expected Production And The Real Wage Rate Is Determi 1 (36.39 KiB) Viewed 33 times

6. (10 points) In Keynesian theory, labor demand is determined by expected production, and the real wage rate is determined by the pricing decisions of businesses. If the price-markup equation is P = m(WL/Q), where m = the business price-cost markup, W = money wage rate, L = labor employed, and Q = production, and from the price markup equation the real wage rate can be written as: W/P = (1/m)(Q/L). Answer the following questions: a. Suppose m = 2 and Q/L=4, what is the value of the real wage rate? b. Suppose m = 2, and Q/L = 8, what is the value of real wage rate? c. Suppose m = 4, and Q/L = 8, what is the value of real wage rate? d. Suppose m = 8, and Q/L = 8, what is the value of the real wage rate? e. Given the numerical examples above, explain how wage inequality (different groups of workers being paid differently) can be explained to how businesses change their price-cost markups, m, in response to productivity growth.