Question

Question 2 (40 points) Based on Classical model of labor market, how would each of the following events affect full employment and the equilibrium real wage in the U.S.? Your answer should include graphs. A. (8 pts.) A large number of working-age immigrants enter the U.S. B. (8 pts.) Tighter environmental laws temporarily reduce the capital stock. (Assume that the effect on the MPN is the standard one.) C. (8 pts.) Workers start attending night school, which makes their expected future income increase. (Assume that their rent productivity is unchanged.) D. (8 pts.) A stock market crash drastically reduces household wealth. E. (8 pts.) The government lowers its spending, but does not change the tax rate on labor income. (If you like, you can assume that all taxes are lump-sum.)

Answer 1

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