Suppose that nominal wages and prices are rigid in the short run, but flexible in the long run. also, consistent with the real world observation, we assume that wages are more rigid than prices. normally, 4% of labor force is naturally unemployed. currently, the nominal wage is w = 600 and the general price level is p = 200. economists have estimated the okun's alpha to be 2.00 and the potential gdp to be up = 500,000.
currently, cyclical rate of unemployment equals and the real gdp equals . therefore, the overall rate of unemployment is and there are unemployed (naturally and cyclically).