Suppose the marginal product of labor in the economy is given by MPN = 0.002(16,000 - N), while the supply of labor is 1000 + 1000w.(a)Find the market-clearing real wage rate and level of employment.(b)What happens to the wage rate and employment if wealth rises, reducing the supply of labor to 500 + 1000w?(c)What happens to the wage rate and employment if after wealth has risen as in part (b), there is a productivity shock that increases the marginal product of labor to MPN = 0.0025(16,000 - N)?
What will be an ideal response?
| (a) | The market-clearing real wage rate equates the demand and supply of labor. Setting w = MPN |
| (b) | Setting w = MPN = 0.002(16,000 - N), we get w = 32 - 0.002(500 + 1000w) = 32 - 1 - 2w. Using |
| (c) | Setting w = MPN = 0.0025(16,000 - N), we get w = 40 - 0.0025(500 + 1000w) = 40 - 1.25 - 2.5w. |
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Who benefits from a higher than expected inflation rate?
a. Lenders and workers. b. Lenders and businesses. c. Borrowers and workers. d. Borrowers and businesses. e. None of the above.
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A) sensitivity of consumer purchases of a good to changes in the price of that good. B) change in total utility obtained by consuming one more unit of a good. C) change in total utility obtained by consuming another unit of a good divided by the change in the price of that good. D) total utility associated with the consumption of a certain number of units of a good divided by the number of units consumed.