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Q. Provided following production functionQ = F(K,L) = K^3/4 L^1/4
a) find an expression for marginal product of labour, MPL, when amount of capital is fixed at 16 units.
b) Suppose capital is fixed at 16 units. If firm can sell its output at a price of $100 per unit and can hire labour at $25 per unit, Explain how many units of labour should firm hire in order to maximize profits?
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Suppose the government decides to increase taxes by $40 billion in order to increase Social Security by the same amount. Explain how will this combined tax-transfer policy affect aggregated demand at current prices.
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