Y = AKI'O'L where K and L are the capital stock and labor uses respectively. Consider that the economy is composed of a representative firm
Y = AKI'O'L\
where K and L are the capital stock and labor uses respectively. Consider that the economy is composed of a representative firm that maximizes profits by hiring L workers and paying them some real wage w, for a total wage bill of The firm also rents capital K at a rate r, paying TIC. Labor and capital are its only costs.
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