use production function labor market and capital market suppose economy initially its potent

Use the Production Function, the Labor Market, and the Capital Market. Suppose that the economy is initially at its potential output level with a labor supply curve that is a positive function of the real wage rate and a capital stock that is fixed.

 

Suppose that there is a significant increase (relative to the growth in the labor force) in the number of workers who are retiring. Incorporating only this additional information, clearly and accurately show in your diagrams above what effects this would have on equilibrium (1) economic output, (2) employment, (3) the real wage rate, (4) the capital stock, and (5) the real rental cost of capital.

 

Provide an economic explanation of what you have shown in your diagrams above. Discuss what happens to equilibrium (1) economic output, (2) employment, (3) the real wage rate, (4) the capital stock, and (5) the real rental cost of capital. Be sure to explain why these changes take place.

 

In addition, suppose that the retiring workers possessed higher than average work skills. Incorporating only this additional information, clearly and accurately show in your diagrams above what effects this would have on equilibrium (1) economic output, (2) employment, (3) the real wage rate, (4) the capital stock, and (5) the real rental cost of capital.

 

Provide an economic explanation of what you have shown in your diagrams above. Discuss what happens to equilibrium (1) economic output, (2) employment, (3) the real wage rate, (4) the capital stock, and (5) the real rental cost of capital. Be sure to explain why these changes take place

 
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