Answer to Question #239653 in Macroeconomics for ammarah

Question

Again, assume, the parameters of the the utility and production functions

can be calibrated as follows:

Productivity factor, AG= 5

Labour elasticity, " = 1/3

Degree to which the agent prefers leisure to work, ↵ = 0.5

Time endowment, T = 1

Find: the new equilibrium values for and indicate what the value represent.

(a) Labour, l. [10 Marks]

(b) Consumption, c. [10 Marks].

(c) Utility, u. [10 Marks]

(d) Graph the equilibrium in a (c : l) space [10 Marks]

((f) Estimate the growth in output in the economy as result of the improvement

in productivity.

Answer 1

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