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Suppose the productivity parameter, z, can take on two values in our model of productivity shocks with labour and capital. When z is high, the
Suppose the productivity parameter, z, can take on two values in our model of productivity shocks with labour and capital. When z is high, the government does not intervene in the economy. However, when z is low, the government forces households to work the same number of hours they were working when z was high. Which of the following statements are correct when z is low and the government in intervening in the economy? Question 1 options: the household's marginal rate of substitution is less than the real wage. the household's marginal rate of substitution equals the real wage. the household's marginal rate of substitution is greater than the real wage. the relationship between the household's marginal rate of substitution and the real wage is ambiguous
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