Consider an economy in which the labor demand function is 40 - (W/P), the labor supply function is 40 + (W/P), the production is Y = 30 + 12L. Suppose the money supply is $333 and the velocity is 4. What is the equilibrium level of employment L* and the equilibrium of price level P*? Hint: Find the equilibrium level of employment from the equality of labor demand and labor.
A) L*=32, P*=5.
B) L*=30, P*=2.
C) L*=34, P*=3.
D) L*=35, P*=6.