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Consider an economy where the government specifes each worker's joband their hours of work. Suppose this...

Consider an economy where the government specifes each worker's joband their hours of work. Suppose this government controls the allocation ofoutput and specifes the consumption of each worker. Assume the leadersof the government make these decisions to maximize their own welfare.Use a graphical analysis to argue that in such an economy, there will be littlelif any incentive for innovation and growth.
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Answer #1

Implementation of caps on work hours and consumption and incomes lead to reduced employees productivity and efficiency based on income substitutions effects as employees put in efforts based on wages offered and thus driving down any potential for innovation to firms.

Moreover, curbs on rise in wages and consumption limits puts breaks on overall consumption functionality which reduces aggregate demand and thus economic growth declines considerably.

PAGE NO. DATE: Employer Shane of Benefits Earnings G Worrez Share of Cost .U с. G worker Share of Benefits S M Employer Share

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