Suppose that the markup of Goods prices over marginal cost is 5% and that the wage-setting equation isn W = P ( 1 - u ), where u is the unemployment...

Suppose that the markup of Goods prices over marginal cost is 5% and that the wage-setting equation isn

W = P ( 1 - u ), 

where u is the unemployment rate

a. what is the real wage, as determined by the price-setting equation?

b. what is the natural rate of unemployment?

c. suppose that the markup of prices over costs increases to 10%. What happens to the natural rate of unemployment? Explain.