This is our lecturer's answer about ULC (question asked by Erwanda)
Dear Erwanda,
It is true that I defined ULC = real wage / lambda.
In the price-setting equation, we indeed get:
growth (W) - growth (P) = growth (lambda), and hence growth (w) = growth (lambda).
What this means is that growth(w) minus growth(lambda) = 0, or ULC (as defined in the 1st line) has to be constant.
The definition of ULC is the same in both instances. The difference is that in the 1st case we define the level of ULC, whereas in the PS-curve we are dealing with the growth rate of ULC. Note that growth (W) - growth (P) = growth (real wage), or if we define w = W/P and express in (log) growth rate form, we get:
log w = log W - log P
d log w/dt = d log W /dt - d log P/dt
growth (w) = growth (W) - growth (P)
Dear Erwanda,
It is true that I defined ULC = real wage / lambda.
In the price-setting equation, we indeed get:
growth (W) - growth (P) = growth (lambda), and hence growth (w) = growth (lambda).
What this means is that growth(w) minus growth(lambda) = 0, or ULC (as defined in the 1st line) has to be constant.
The definition of ULC is the same in both instances. The difference is that in the 1st case we define the level of ULC, whereas in the PS-curve we are dealing with the growth rate of ULC. Note that growth (W) - growth (P) = growth (real wage), or if we define w = W/P and express in (log) growth rate form, we get:
log w = log W - log P
d log w/dt = d log W /dt - d log P/dt
growth (w) = growth (W) - growth (P)
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