Question: 2 (20 points) Rather than supposing that the representative rm at the beginning of period t can decide how much labor it would like to

 2 (20 points) Rather than supposing that the representative rm at

2 (20 points) Rather than supposing that the representative rm at the beginning of period t can decide how much labor it would like to hire for use in period t, suppose that labor used in period t must be chosen in period t 1. (That is, suppose n is a stock (or state) variable.) As usual, capital for use in production in period t must be purchased in period t 1 because of the \"time to build\" surrounding capital goods. With this lag in labor hiring, construct the lifetime (in the two-period model) prot function of the rm, and Show that the real interest rate now is a relevant price for labor as well as capital goods. Provide brief economic intuition. (Hint: Make as close an analogy with our model of rm ownership of capital as you canin particular, think of workers in this model as being \"owned\" (contractually obligated to) rms.)

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