You are the Minister of Finance and your Prime Minister has asked you how to make people better off materially. So you ask your Chief Economist to come up with an answer to this request. The Chief Economist knows that the aggregate labour supply can be described using the function L s = 16 (W/P) where L s is the aggregate quantity of labour supplied and (W/P) is the real wage. He also knows that the long-run output of the economy can be described by the production function Y = 60 K1/2L 1/2 where Y is the aggregate level of output, L is the aggregate level of employment and and K is the aggregate capital stock in the economy. He also knows from his university courses that the aggregate production function determines the marginal product of labour which in this case equals,

MP L = 30K1/2 L1/2 . [Ref: M 52-65, Notes 5-1, 5-2] a) The economists reporting to the Chief Economist have calculated that the total capital stock in the economy is 25. He now has to determine the equilibrium real wage and level of employment for this economy. He's asked you to check his calculations. What would you come up with? The Chief Economists has also asked you to prepare diagrams to show the state of the labour market and the long-run aggregate productive capability of