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Q.1 (20 points ) Movements along the AS curves Given the technology parameter (A) and the capital stock (K), we can determine labor employment (N),
Q.1 (20 points ) Movements along the AS curves Given the technology parameter (A) and the capital stock (K), we can determine labor employment (N), along with wages (w and W) and rentals (rk and Rk), from equilibria in the labor and capital - input markets , and output (y) from the aggregate production function . Consider the six variables mentioned above viz ., y, N; W, w; Rk, and rk in the context of the following SRAS diagram . P E SRAS >y (:1) Which of these 6 variables {y, N; W, w; Rk, rk} would remain constant as we move upward along this SRAS curve (say, from point D to point E)? (b) Which of these 6 variables { y, N; W, w; RR, rk} would change and in what direction as we move upward along this SRAS curve (say, from point D to point E)? (c) Which of these 6 variables {y, N; W, w; Rk, rk} would remain constant , and which of them would change and in what direction ,as we move upward along a given vertical LRAS curve (not shown in the above diagram )
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