Evaluate the effect of government intervention

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Assignment:

In this question, you will put into practice your knowledge of the effects of the fiscal policy. Consider the US economy in the context of the two-period model with investment and government. We will model the effects of the COVID-19 pandemic on the US economy and evaluate the effect of government intervention.

Answer the following question that will guide you along the way.

Suppose that the COVID-19 pandemic negatively affected the TFP of the US economy. How does this affect labor demand and why? Draw a diagram to justify your answer. Hint: Remember that the labor demand is determined by the marginal product of labor, MPL = ∂zF(K,N) ∂N.

Reference no: EM133662373

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