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Unformatted text preview: good: Y = zK ( N d ) 1- (2) where z is the exogenous total factor productivity, K is the rms capital stock, and N d is the hours of labour employed by the rm. The rm faces a wage rate w in the labor market. Calculate the rms demand for labour. (e) The government purchases an exogenous level G of total output from the rm. It nances this purchase with lump-sum taxes, T , collected from the consumer. Dene a competitive equilibrium for this economy. (f) Assume that = T . Determine the equilibrium wage rate, w * , the equilibrium level of employment, and the equilibrium level of consumption. (g) Suppose that the total productivity, z , increases. Determine the impact of this increase in z on consumption, output, labour hours, and wage rate in equilibrium. 1...
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- Fall '09