Part2

. Now summarize what happens to the following variables in the economy. You must explain your reasoning behind the answers. Employment(N): Output(Y ): Wage rate(w): Interest rate(r): 4 Consumption(C): Leisure(l): Investment(I): Future capital stock(K0 ):

^ Related to this prompt: Consider the Real Intertemporal Model we discussed in class. Suppose that the economic agents expect the energy(oil) prices decrease in future. This is equivalent to an increase in the future total factor productivity(z 0 ) in our model.