Let M = 36, k = 3, Ls = W/P, MPN = L-1/2 and Y = 2L1/2 . Calculate the labor demand curve, the aggregate demand curve, and the equilibrium values of the real wage, labor, output, and the price level
What will be an ideal response?
Setting the real wage equal to the marginal product of labor allows you to solve for the labor demand curve as Ld = (W/P)-2 . Setting this equal to labor supply allows you to solve for the equilibrium value of labor and the real wage, L = 1 and W/P = 1 . Plugging these values into the production function gives you Y=2 . Plugging all of these values into the quantity theory equation allows you to solve for the equilibrium price level, P = 6.
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The Federal Reserve has been quite consistently successful in keeping the inflation rate low over its entire history
a. True b. False
When a negative externality exists in a market, the cost to producers
a. is greater than the cost to society. b. will be the same as the cost to society. c. will be less than the cost to society. d. will differ from the cost to society, regardless of whether an externality is present.