1. Another economy has the production Y = A * K^0.5 * L^0.5, the marginal product MPL = 0.5 * A * K^0.5 / L^0.5, in which K = 144 and the supply of labor w = 5 * EP/P *L^0.5 Productivity is A=50. In absence of shocks and policies, EP/P=1, the number of jobs is L = 60, and wage is w = 38.73. But now inflation is slower than expected, with EP/P=1.2. Find the new equilibrium number of workers.
1. Another economy has the production
Y = A * K^0.5 * L^0.5,
the marginal product
MPL = 0.5 * A * K^0.5 / L^0.5, in which K = 144
and the supply of labor
w = 5 * EP/P *L^0.5
Productivity is A=50. In absence of shocks and policies, EP/P=1, the number of jobs is L = 60, and wage is w = 38.73.
But now inflation is slower than expected, with EP/P=1.2.
Find the new equilibrium number of workers.
2. Find the new equilibrium wage at EP/P=1.2
3. Graph the change in the labor
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Now let's consider this same scenario in terms of the accelerationist
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