Let's assume production is given by Yt=AK^(1/3)L^(2/3). Capital stock has reached its steady state at K= 1000 and A= 3/2. Assume there are no frictions/rigidities unless otherwise stated. There are L= 1000 workers who supply labor inelastically (this means they don’t care about leisure/there is no disutility from working).
(a) What does our long-run model say the level of unemployment (Ut) is? What about the unemployment rate (ut)?
(b) How many workers are demanded and employed now?
(c) What is the level of unemployment now? What is the unemployment rate?