Suppose the Economy's Production Function Is Y = A(300N -

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?