1. Labor Supply Elasticity and Amplication of Productivity Shocks: Consider the basic neoclassical model as presented in class, but with an inelastic supply of labor (labor supply does not depend on the wage wt). The equations summarizing the equilibrium of the model are given below: Ct : Cd(Y;11/;+1irt) Nt = N3(6t) Nt = Nd(wt,At,Kt) It = Id(n,At+1,Kt) Yt = AtF(Kt,Nt) Y}. = Ct + It These equations differ from the model presented in class only in that labor supply is not a function of the real wage, just labor supply shock Hi. When N 3 does not depend at all on wt (i.e., it must be the same for all values of the real wage) it is perfectly inelastic in the real wage