The production function in an economy is:

Y = A(5N 0:0025N^2)

where A is productivity. The labor supply curve is:

NS = 55 + 10(1-t)w

where NS is the amount of labor supplied, w is the real wage, and t is the tax rate

on wage income.

Desired consumption and investment are:

C= 300 + 0.8(Y-T)-200r

I=258.5-250r

Taxes and government purchases are T =20+.5Y and G = 50.

Finally, the money demand is:

Md/P=.5Y-250i

The numbers are as follows. Productivity is A = 2, tax rate is t = 0.5, expected

inflation is pi=.02 and nominal money supply is M = 9150.

Ask a new question

what are the general equilibrium level of the real wage, employment and output