what is the natural level of output
(b) The natural level of output can be determined by looking at the aggregate. supply relation alone. TRUE. The natural rate of unemployment, and hence the natural level of output, is. determined by labour market conditions. The natural level of output Y. n is such that, at the associated rate of unemployment u. n, the real wage (W/Pe) chosen in wage setting (workersâ side) is equal to the real wage. (W/P) chosen in price setting (firmsâ side). Therefore, the aggregate supply relation determines the natural level of output, for.