-The Table Above Shows the Aggregate Production Function in the Economy

question 64

Essay

-The table above shows the aggregate production function in the economy of Prescottia. The people of Prescottia taxes and are willing to work 248 million hours a year for a real wage rate of $8 an hour, and for each dollar incr the real wage, they are willing to work 4 million additional hours per year.
a) Draw the economy's aggregate production function.
b) Prescottia's demand for labor schedule is in the table above. Draw Prescottia's demand for labor and supply curves.
c) What are the economy's full- employment quantity of labor and real wage rate? What is the country's potent GDP?
d) Suppose that Prescottia's government introduces a 25 percent income tax. Using your graph, what happens t demand for labor? What happens to the supply of labor? Explain.
e) After the tax is imposed, what happens to Prescottia's full- employment quantity of labor? What happens to Prescottia's potential GDP?

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Definitions:

Deposits in Transit

Funds that have been received and recorded by a company but not yet credited by the bank, often seen in the reconciliation of bank statements.

Bank Statement Balance

The ending balance on a bank statement, representing the total amount of money in an account as recorded by the bank at the end of a given period.

Petty Cash Account

A small amount of cash kept on hand to pay for minor or incidental expenses.

Fund Replenishing

The process of adding money to a fund to restore its level after expenses have been incurred.