Given the long run production function, estimate the long-run real GDP and equilibrium real wage.
This problem considers the long-run economy. Assume the production function for real GDP is Y = K0.5 L0.5. Assume K = 100 and L = 100.
1. Illustrate what is the long-run value for real GDP?
2.What is the equilibrium real wage?
3.If the minimum real wage is set at W/P = 1, describe how many workers are hired? What is the associated unemployment rate?