Suppose the marginal product of labor in the economy is given by MPN = 0.002(16,000 – N), where N is aggregate unemploym

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Suppose The Marginal Product Of Labor In The Economy Is Given By Mpn 0 002 16 000 N Where N Is Aggregate Unemploym 1 (237.54 KiB) Viewed 19 times

Suppose the marginal product of labor in the economy is given by MPN = 0.002(16,000 – N), where N is aggregate unemployment. The aggregate quantity of labor supplied is 1000+ 1000w, where w is the real wage rate. a. (5 points) Find the market-clearing real wage rate and level of employment. b. (5 points) Suppose a tremendous boom occurs in the stock market, increasing people's wealth overnight. What is likely to happen to the level of employment and real wage rate? You do not have to draw a graph; just a verbal explanation should be fine. C. (5 points) After the wealth increase described in part (b), the new labor supply is 500+ 1000w. What happens to the wage rate and employment? d. (5 points) Suppose medical science cures the common cold, causing fewer work days lost due to illness, thus greatly increasing labor productivity. What is likely to happen to the level of employment and real wage rate? You do not have to draw a graph; just a verbal explanation should be fine. e. (5 points) What happens to the wage rate and employment if after wealth has risen as in part (b), there is the productivity shock as described in part (d) that increases the marginal product of labor to MPN = 0.0025(16,000 – N)? =