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show your work 4) (15 points) Suppose there are two types of individuals in an economy: (college) educated and unedu cated. Each uneducated has 1

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4) (15 points) Suppose there are two types of individuals in an economy: (college) educated and unedu cated. Each uneducated has 1 :L' units of labor while each educated has 1+1: units such that 1 > a: > 0, and suppose both supply their labors inelastically in each period. The parameter m measures the returns to edu la cation. The production function is in the form of F(A, K, LE, LU) = AKO' (((1+$)LE)7+ ((1$)LU)7) 1' , where L E and LU are total employment of educated and uneducated, respectively, and (1+:E)LE and (1m)LU are total employment units. The parameter 7 is such that 0 113' > :13. What happens to wages and unemployment of educated and uneducated in short run and long run under both of these scenarios? Would you use monetary policy under any of these scenarios? Assume that job nding happens instantly when there is a job vacancy. Explain in detail by showing the changes in the relevant markets

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