Essay
Suppose the economy's production function is Y = A(300N - N²).The marginal product of labour is MPN = A(300 - 2N).Suppose that A = 10.The supply of labour is NS = 0.05w + 0.005G.
a.If G is 26,000,what are the real wage,employment,and output?
b.If G rises to 26,400,what are the real wage,employment,and output?
c.If G falls to 25,600,what are the real wage,employment,and output?
d.In cases (b)and (c),what is the government purchases multiplier;that is,what is the change in output divided by the change in government purchases?
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