Consider an economy with the production function Y = L1/3

| November 24, 2016

Consider an economy with the production function Y = L1/3

a) Derive the Labor demand Curve

b) If Labor supply curve is Ls = (w/p), calculate the equilibrium levels of real wage, labor and output.

c) Assume MS= 45 and k = 3. What is the equation of the aggregate demand curvefor this example? What is the price level? What is the nominal wage level?

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