1. Another economy has the production Y = A * K^0.5 * L^0.5, the marginal product MPL = 0.5 * A * K^0.5 / L^0.5, in which K = 144 and the supply of labor w = 5 * EP/P *L^0.5 Productivity is A=50. In absence of shocks and policies, EP/P=1, the number of jobs is L = 60, and wage is w = 38.73. But now inflation is slower than expected, with EP/P=1.2. Find the new equilibrium number of workers. 2. Find the new equilibrium wage at EP/P=1.2 3. Graph the change in the labor market equilibrium. Mark the before and after equilibria with E0 and E1. Label axes and curves, map relevant values onto axes.
1. Another economy has the production
Y = A * K^0.5 * L^0.5,
the marginal product
MPL = 0.5 * A * K^0.5 / L^0.5, in which K = 144
and the supply of labor
w = 5 * EP/P *L^0.5
Productivity is A=50. In absence of shocks and policies, EP/P=1, the number of jobs is L = 60, and wage is w = 38.73.
But now inflation is slower than expected, with EP/P=1.2.
Find the new equilibrium number of workers.
2. Find the new equilibrium wage at EP/P=1.2
3. Graph the change in the labor
4. Now let's consider this same scenario in terms of the accelerationist
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