$\begin{array}{l}
\begin{array} { c c c }
\hline & \begin{array} { c }
\text { Quantity of labor } \
\text { demanded }
\end{array} & \begin{array} { c }
\text { Quantity of labor } \
\text { supplied }
\end{array} \
\begin{array} { c }
\text { Real wage rate } \
\text { (2005 dollars) }
\end{array} & \begin{array} { c }
\text { billions of hours } \
\text { per year) }
\end{array} & \begin{array} { c }
\text { (billions of hours } \
\text { per year) }
\end{array} \
\hline 50 & 80 & 100 \
40 & 90 & 90 \
30 & 100 & 80 \
20 & 110 & 70 \
10 & 120 & 60 \
\hline
\end{array}&
\begin{array} { c c }
\hline \begin{array} { c }
\text { Employment } \
\text { (billions } \
\text { of hours } \
\text { per year) }
\end{array} & \begin{array} { c }
\text { Real GDP } \
\text { (billions of } \
\text { 2005 dollars) }
\end{array} \
\hline 60 & 2.0 \
70 & 3.0 \
80 & 3.7 \
90 & 4.2 \
110 & 4.5 \
\hline
\end{array}
\end{array}$The tables above show a nation's labor demand and labor supply schedules and its production function.
- Given the equilibrium in the labor market, potential GDP is

Question

$\begin{array}{l}
\begin{array} { c c c } 
\hline & \begin{array} { c } 
\text { Quantity of labor } \
\text { demanded }
\end{array} & \begin{array} { c } 
\text { Quantity of labor } \
\text { supplied }
\end{array} \
\begin{array} { c } 
\text { Real wage rate } \
\text { (2005 dollars) }
\end{array} & \begin{array} { c } 
\text { billions of hours } \
\text { per year) }
\end{array} & \begin{array} { c } 
\text { (billions of hours } \
\text { per year) }
\end{array} \
\hline 50 & 80 & 100 \
40 & 90 & 90 \
30 & 100 & 80 \
20 & 110 & 70 \
10 & 120 & 60 \
\hline
\end{array}&
\begin{array} { c c } 
\hline \begin{array} { c } 
\text { Employment } \
\text { (billions } \
\text { of hours } \
\text { per year) }
\end{array} & \begin{array} { c } 
\text { Real GDP } \
\text { (billions of } \
\text { 2005 dollars) }
\end{array} \
\hline 60 & 2.0 \
70 & 3.0 \
80 & 3.7 \
90 & 4.2 \
110 & 4.5 \
\hline
\end{array}
\end{array}$The tables above show a nation's labor demand and labor supply schedules and its production function.
- Given the equilibrium in the labor market, potential GDP is

Quizplus · Accepted Answer

The equilibrium in the labor market occurs where the quantity of labor demanded equals the quantity of labor supplied, which is at 90 billion hours per year. At this level of employment, the real GDP is $4.2 trillion, which is the potential GDP.

The Tables Above Show a Nation's Labor Demand and Labor