Question: Short Question 2: {20 points) Consider the production model studied in Chapter 4. Final output in the economy is pro- duced using capital K and

Short Question 2: {20 points) Consider the production model studied in Chapter 4. Final output in the economy is pro- duced using capital K and labor L. The production function is: Y = AKUE'LW Assume that the supply of all inputs are exogenous and equal to f; and R". Perfectly compet- itive rms are price-takers and choose how much capital and labor to demand by maximizing prots. Let in and r denote the wage and rental rate of one unit of labor and capital respec- tively. (a) What are the 5 endogenous variables in this model? Also list the exogenous variables and the parameters and provide a brief explanation of each. (5 points)

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