Question: Imagine the government invests in education and job training to such an extent that after a period of time, workers become more productive. a. Show

Imagine the government invests in education and job training to such an extent that after a period of time, workers become more productive.

a. Show the impact of an increase in labor productivity on a profit maximization graph. What happens to the price firms choose, the nominal wage, and output?

b. What impact does the increase in labor productivity have on the price-setting curve?

c. Show the impact of the increase in labor productivity on a labor market graph (with employment on the horizontal axis and real wage on the vertical axis). How do the real wage and level of employment change?

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