12. Consider the following classical model of a closed economy: Ys = AL1/2 yd C+I+G C...

 

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12. Consider the following classical model of a closed economy: Ys = AL1/2 yd C+I+G C I 2000 300+0.7Y-0.7T Ys = yd = Y 10,000r W/P = MPL (Ld) L = 22500 L = La A = 30 G= 1000 T=1500 a. What value of real aggregate income (Y) will result from full employment of labor? b. What is the equilibrium real wage rate (W/P)? c. What are the equilibrium values of national saving (S), investment (I), and the real interest rate (r)? d. What would the new equilibrium values of Y, W/P, S, I, and r be if total factor productivity (A) increased from 30 to 40, all else equal? e. What would the new equilibrium values of Y, W/P, S, I, and r be if taxes (T) decreased from 1,500 to 1000, all else equal? Assume that A = 30. 12. Consider the following classical model of a closed economy: Ys = AL1/2 yd C+I+G C I 2000 300+0.7Y-0.7T Ys = yd = Y 10,000r W/P = MPL (Ld) L = 22500 L = La A = 30 G= 1000 T=1500 a. What value of real aggregate income (Y) will result from full employment of labor? b. What is the equilibrium real wage rate (W/P)? c. What are the equilibrium values of national saving (S), investment (I), and the real interest rate (r)? d. What would the new equilibrium values of Y, W/P, S, I, and r be if total factor productivity (A) increased from 30 to 40, all else equal? e. What would the new equilibrium values of Y, W/P, S, I, and r be if taxes (T) decreased from 1,500 to 1000, all else equal? Assume that A = 30.