1. Use the following information about the labor market:

Labor Market and Production:

W = 11-N

W = 1+N

Y = A*K.5N.5

Goods Market:

C = 5+0.5(Y-T)

I = 15-50r

T = 10

G = 5

Asset Market:

MS = 25/P; assume that the P=1 initially

MD = Y - 50r

a. Suppose that the current capital-labor ratio is 1 (the amount of capital exactly equals the number of

workers) and that the total factor productivity (A) equals 6. What are the equilibrium wage, employment

level, and the full employment level of output? Draw this all graphically and make sure to label the graph.