I need assistance with part B and C the Answers are provided for part. Econ 312 Macroeconomic TheoryQuestion 1. The labor marketIn an economy, the firms profit-maximize by comparing the MPL to the wage:0.5.A. √K/√L = WAnd workers negotiate their wage raises by looking at the # of jobs and the expected inflation:EPW = - √LP.The productivity is A=3.7 and there is K = 36 of capital.(a) Prior to shocks and policies, the economy is in equilibrium with EP=P=2. Find the equilibriumnumber of workers. Then find the equilibrium wage.(b) Now the actual price level P₁ falls below the expected price level EP. Graph the labormarket. Clearly label axes and curves. Show the distance that represents the disequilibrium.Label the before and after equilibria with E, and E₁.(c) Name one shock that could result in this change on the labor market. Be specific about itstype and direction.Answers are provided1. (a) 11.1, (b) 3.33

The labor market is the market for labor, where employment and wages are determined by the forces of…

(b) Now the actual price level P₁ falls below the expected price level EP. Graph the labor market. Clearly label axes and curves. Show the distance that represents the disequilibrium. Label the before and after equilibria with Eo and E₁. (c) Name one shock that could result in this change on the labor market. Be specific about its type and direction.

(b) Now the actual price level P₁ falls below the expected price level EP. Graph the labor market. Clearly label axes and curves. Show the distance that represents the disequilibrium. Label the before and after equilibria with Eo and E₁. (c) Name one shock that could result in this change on the labor market. Be specific about its type and direction.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter25: The Keynesian Perspective

Section: Chapter Questions

Problem 1SCQ: In the Keynesian framework, which of the following events might cause a recession? Which might cause...

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