Question: 3. Upward Sloping Ys (again!): Suppose the equations characterizing the Neoclassical equilibrium model with a twist, fiscal policy, and money are as follows. Ct =

3. Upward Sloping Ys (again!): Suppose the equations characterizing the Neoclassical equilibrium model with "a twist", fiscal policy, and money are as follows. Ct = C'd ( Yt - Gt, Yt+1 - Gt+1, rt) Nt = NS ( wt, Ot, rt) Nt = Na ( Wt, At, Kt) It = [d (rt, At+1, Kt) Yt = Ct+ It + Gt Yt = AtF (Kt, Nt) Mt = PtMd (it, Yt) rt = it - Tit+ 1 Here, as in the last problem set we consider an alternative labor supply function that depends positively on the real interest rate rt. (a) What are the exogenous variables in the model? What are the endogenous variables? (b) Graphically derive the Ys curve with the alternative labor supply function NS ( Wt , Ot , rt)
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