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Consider the one-period macroeconomic model. Output, Y, is given by a Cobb-Douglas production function with diminishing marginal product of labour. The household has a time
Consider the one-period macroeconomic model. Output, Y, is given by a Cobb-Douglas production function with diminishing marginal product of labour. The household has a time constraint, h=Ns l, where h is the time endowment, l is leisure, and Ns is labour supply. Households supply labour, receive wage, w, on their labour income and do not pay taxes. The household derives utility from consumption, c, and leisure, l. Preferences are such that the substitution effect dominates the income effect. Suppose that workplaces start harassing employees. As a result, the households preferences change and there is an increase in the marginal rate of substitution of leisure with respect to consumption for any quantities of consumption and leisure. Which of the following would result? Question 12 options: reduction in consumption, employment, aggregate output, real wage, and an increase in leisure reduction in consumption, employment, aggregate output, and an increase in leisure and the real wage reduction in consumption, employment, aggregate output, an increase in leisure, and no change in the real wage increase in consumption, employment, aggregate output, real wage, and a reduction in leisure increase in consumption, employment, aggregate output, a reduction in leisure, and no change in the real wage increase
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