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Consider the neoclassical model. Consider the following labor market: Nt Z 01): ztr Nt = b1Wt + bZAt + bgKt Assume that the parameters a1,

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Consider the neoclassical model. Consider the following labor market: Nt Z 01"\"): ztr Nt = b1Wt + bZAt + bgKt Assume that the parameters a1, a2, b1, b2, b3 are all positive. Hint: 3: is a variable that captures characteristics other than the real wage that affect labor supply, such as unemployment insurance, demographic changes, or changes in preferences). a) What are the supply and demand functions for labor? b) Find expressions for N (labor) and w (wage) as a function of the parameters and exogenous variables. c} Assume that 31: 1, 32 = 0.4, b; = 2, 52 = 0.5and 153 = 0.3. Use an Excel spreadsheet to find the numerical values of the answers obtained in (b). d) Assume that the production function is Y} : AthNf\". Assume that a : 1/3. Find the level of production. {e} Assume that A H; increases from Ito 1.2. Find the new numerical values of 1'}, N; W1; 13;, Cr (consumption at "t" period) and 1} {investment at "t" period). Do they move in the theoretically expected direction? Explain using graphs in your answer f) Suppose again that A 3+1 :1, but that Gtincreases from 0.2 to 0.3. Find a numerical solution for the endogenous variables. Do they move in the theoretically expected direction? Explain using graphs in your

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