Application. The outbreak of the bubonic plague-the Black Death- in 1348 reduced the populationof Europe by about one-third within a few years,which resulted in a massive reduction in the laborforce during the plague years.Suppose the outbreak of the bubonic plague- theBlack Death- in 1348 did not cause the TEP.parameter to fall (this is a reasonable assumptionfor simplicity as the effect of the fall in TFP wasmuch less significant than the effect of the massivereduction in the labor force during the BlackDeath, so the effect of the fall in TFP wasnegligible compared with the massive reduction inthe labor force during the Black Death). Using thecomplete intertemporal model developed in class,brieáy explain the eşects of the outbreak on theequilibrium values of real wage, output, realinterest rate, consumption, investment, and theprice level.

Initially labor market is equilibrium where labor demand curve and labor supply curve intersects and…

Answered: the labor force during the Black…

ENGR.ECONOMIC ANALYSIS

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the labor force during the Black Death). Using the complete intertemporal model developed in class, brieáy explain the eşects of the outbreak on the equilibrium values of real wage, output, real interest rate, consumption, investment, and the price level.