For this question, assume that Y = N. Based on our understanding of the labour market model, we know that an increase in the markup will cause:

Question

Quizplus · Accepted Answer

When Y=N, an increase in the markup causes a decrease in the natural level of output. This is because the increase in the markup leads to an increase in prices, which reduces demand for goods and services, leading to a decrease in output and thus a decrease in the natural level of output.

For This Question, Assume That Y = N