# Econ 201 Macroeconomic Theory I Assignment 1 (Chapter 10, 11,12)

Save this PDF as:

Size: px
Start display at page:

## Transcription

2 g) If the production function is in the form of constant return to capital, for example, like Y=AK, where K is capital and A is a constant productivity level, then capital accumulation can sustain economic growth. True. h) A higher saving rate implies a higher growth rate of capital per worker for some time, and a higher level of capital per effective worker in the steady state, but not a higher rate of growth of output per worker in the balance growth path. True. The increase of saving rate will lead to an increase of growth rate for some time, but in the new ss, the output per effective labor is still constant. 2. Question 2 of Chapter 10 in the textbook. a. \$2*200+\$3*3000=\$13,000 b. 10*800+30*300=17,000 pesos c. (10*800+30*300)/10=\$1700 d. \$2*800+\$3*300=\$2500 e. Mexican standard of living relative to the U.S. exchange rate method: 1700/13000 =0.13; PPP method: 2500/13000= Question 7 of Chapter 11 in the textbook. a. Yes. b. Yes. c. Yes. d. Y/N = (K/N) 1/3 e. In steady state, sy//n = δk/n, which, given the production function in part (d), implies K/N=(s/δ) 3/2 f. Y/N =(s/δ) 1/2 g. Y/N = 2 h. Y/N = 2 1/2 4. Question 8 of Chapter 11 in the textbook. a. Substituting from problem 7 part (e) implies K/N=1. b. Substituting from problem 7 part (f), Y/N=1. c. K/N=0.35; Y/N=0.71 d. K/N Y/N t t t t Analyze using a diagram (similar to Figure 12-3) the short run and long run effect of an increase in on the level of K/AN, Y/AN, and the growth g A 2

3 rate of K/N, Y/N, K and Y. Draw the time paths of K/AN, Y/AN, K/N, Y/N, K and Y before and after the change of. g A 3

4 4

5 5

6 6. Question 3 of Chapter 12 in the textbook. a. Most technological progress seems to come from R&D activities. See discussion on fertility and appropriability. b. This proposal would probably lead to lower growth in poorer countries, but higher growth in rich countries. c. This proposal would lead to an increase in R&D spending. If fertility did not fall, there would be an increase in the rates of technological progress and output growth. d. Presumably, this proposal would lead to a (small) decrease in the fertility of applied research and therefore to a (small) decrease in growth. e. This proposal would reduce in the appropriability of drug research. Presumably, there would be a reduction in the development of new drugs, a reduction in the rate of technological progress, and a reduction in the growth rate. Q7 will be in AS2. 8. a)-c): Question 7 of Chapter 12 in the textbook. d) Find the golden rule level of saving rate that maximizes the steady state consumption per effective worker, C/AN. a. i. K/(AN) = (s/(δ+g A +g N )) 2 = 1 ii. Y/(AN)= (K/AN) 1/2 =1 iii. g Y/(AN) = 0 iv. g Y/N = g A =4% v. g Y = g A +g N =6% b. i. K/(AN) = (s/(δ+g A +g N )) 2 = 0.64 ii. Y/(AN)= (K/AN) 1/2 =0.8 iii. g Y/(AN) = 0 iv. g Y/N = g A =8% v. g Y = g A +g N =10% An increase in the rate of technological progress reduces the steady-state levels of capital and output per effective worker, but increases the rate of growth of output per worker. c. i. K/(AN) = (s/(δ+g A +g N )) 2 = 0.64 ii. Y/(AN)= (K/AN) 1/2 =0.8 iii. g Y/(AN) = 0 iv. g Y/N = g A =4% v. g Y = g A +g N =10% 6

7 (K/(AN)) = (4/5) 2 ; (Y/(AN)) = (4/5); g Y/(AN) = 0; g Y/N = 4%; g Y = 10% People are better off in case a. Given any set of initial values, the level of technology is the same in cases (a) and (c), but the level of capital per effective worker is higher at every point in time in case (a). Thus, since Y/N=AY/(AN)=A(K/(AN)) 1/2 =A 1/2 (K/N) 1/2, output per worker is always higher in case (a). d. Golden Rule level of saving rate: C Y C s C = ( 1 s) Y = (1 s) = (1 s) AN AN AN δ + g A + g N d C d s 1 d ( ) = ((1 s) ) = s(1 s) ds AN ds δ + g A + g N δ + g A + g N ds d C ( ) = 0 1 2s = 0 s = 0.5 ds AN 7

### The Golden Rule. Where investment I is equal to the savings rate s times total production Y: So consumption per worker C/L is equal to:

The Golden Rule Choosing a National Savings Rate What can we say about economic policy and long-run growth? To keep matters simple, let us assume that the government can by proper fiscal and monetary policies

### MACROECONOMICS SECTION

MACROECONOMICS SECTION GENERAL TIPS Be sure every graph is carefully labeled and explained. Every answer must include a section that contains a response to WHY the result holds. Good resources include

### Finance 30220 Solutions to Problem Set #3. Year Real GDP Real Capital Employment

Finance 00 Solutions to Problem Set # ) Consider the following data from the US economy. Year Real GDP Real Capital Employment Stock 980 5,80 7,446 90,800 990 7,646 8,564 09,5 Assume that production can

### CHAPTER 7 Economic Growth I

CHAPTER 7 Economic Growth I Questions for Review 1. In the Solow growth model, a high saving rate leads to a large steady-state capital stock and a high level of steady-state output. A low saving rate

### Economic Growth I: Capital Accumulation and Population Growth

CHAPTER 8 : Capital Accumulation and Population Growth Modified for ECON 2204 by Bob Murphy 2016 Worth Publishers, all rights reserved IN THIS CHAPTER, YOU WILL LEARN: the closed economy Solow model how

### Economic Growth. (c) Copyright 1999 by Douglas H. Joines 1

Economic Growth (c) Copyright 1999 by Douglas H. Joines 1 Module Objectives Know what determines the growth rates of aggregate and per capita GDP Distinguish factors that affect the economy s growth rate

### Review Questions - CHAPTER 8

Review Questions - CHAPTER 8 1. The formula for steady-state consumption per worker (c*) as a function of output per worker and investment per worker is: A) c* = f(k*) δk*. B) c* = f(k*) + δk*. C) c* =

### Long-Run Average Cost. Econ 410: Micro Theory. Long-Run Average Cost. Long-Run Average Cost. Economies of Scale & Scope Minimizing Cost Mathematically

Slide 1 Slide 3 Econ 410: Micro Theory & Scope Minimizing Cost Mathematically Friday, November 9 th, 2007 Cost But, at some point, average costs for a firm will tend to increase. Why? Factory space and

### Econ 102 Economic Growth Solutions. 2. Discuss how and why each of the following might affect US per capita GDP growth:

Econ 102 Economic Growth Solutions 2. Discuss how and why each of the following might affect US per capita GDP growth: a) An increase of foreign direct investment into the US from Europe is caused by a

### Agenda. Long-Run Economic Growth, Part 1. The Sources of Economic Growth. Long-Run Economic Growth. The Sources of Economic Growth

Agenda The Sources of Economic Growth Long-Run Economic Growth, Part 1 Growth Dynamics: 8-1 8-2 Long-Run Economic Growth Countries have grown at very different rates over long spans of time. The Sources

### ( ) = ( ) = ( + ) which means that both capital and output grow permanently at a constant rate

1 Endogenous Growth We present two models that are very popular in the, so-called, new growth theory literature. They represent economies where, notwithstanding the absence of exogenous technical progress,

### CHAPTER 7: AGGREGATE DEMAND AND AGGREGATE SUPPLY

CHAPTER 7: AGGREGATE DEMAND AND AGGREGATE SUPPLY Learning goals of this chapter: What forces bring persistent and rapid expansion of real GDP? What causes inflation? Why do we have business cycles? How

### Econ 100B: Macroeconomic Analysis Fall Problem Set #3 ANSWERS (Due September 15-16, 2008)

Econ 100B: Macroeconomic Analysis Fall 2008 Problem Set #3 ANSWERS (Due September 15-16, 2008) A. On one side of a single sheet of paper: 1. Clearly and accurately draw and label a diagram of the Production

### Long Run Growth Solow s Neoclassical Growth Model

Long Run Growth Solow s Neoclassical Growth Model 1 Simple Growth Facts Growth in real GDP per capita is non trivial, but only really since Industrial Revolution Dispersion in real GDP per capita across

### Agenda. Long-Run Economic Growth, Part 2. The Solow Model. The Solow Model. Fundamental Determinants of Living Standards. Endogenous Growth Theory.

Agenda Fundamental Determinants of Living Standards. Long-Run Economic Growth, Part 2 Endogenous Growth Theory. Policies to Raise Long-Run Living Standards. 8-1 8-2 The saving rate. Increasing the saving

### UNIVERSITY OF OSLO DEPARTMENT OF ECONOMICS

UNIVERSITY OF OSLO DEPARTMENT OF ECONOMICS Exam: ECON4310 Intertemporal macroeconomics Date of exam: Thursday, November 27, 2008 Grades are given: December 19, 2008 Time for exam: 09:00 a.m. 12:00 noon

### 14.02 Principles of Macroeconomics Problem Set 1 Fall 2005 ***Solution***

Part I. True/False/Uncertain Justify your answer with a short argument. 14.02 Principles of Macroeconomics Problem Set 1 Fall 2005 ***Solution*** Posted: Monday, September 12, 2005 Due: Wednesday, September

### Answer Key to the Sample Final Exam Principles of Macroeconomics Professor Adrian Peralta-Alva University of Miami

True/false and explain Answer Key to the Sample Final Exam Principles of Macroeconomics Professor Adrian Peralta-Alva University of Miami State whether the following statements are true or false and explain

### University of Saskatchewan Department of Economics Economics 414.3 Homework #1

Homework #1 1. In 1900 GDP per capita in Japan (measured in 2000 dollars) was \$1,433. In 2000 it was \$26,375. (a) Calculate the growth rate of income per capita in Japan over this century. (b) Now suppose

### 4. In the Solow model with technological progress, the steady state growth rate of total output is: A) 0. B) g. C) n. D) n + g.

1. The rate of labor augmenting technological progress (g) is the growth rate of: A) labor. B) the efficiency of labor. C) capital. D) output. 2. In the Solow growth model with population growth and technological

### Chapter 7. A proximate determinant of long-run growth: Productivity

Chapter 7 A proximate determinant of long-run growth: Productivity Introduction: Proximate determinants Physical capital Population growth Human Capital Health Education Productivity Technology Efficiency

### Technology and Economic Growth

Technology and Economic Growth Chapter 5 slide 0 Outline The Growth Accounting Formula Endogenous Growth Theory Policies to Stimulate Growth The Neoclassical Growth Revival Real wages and Labor Productivity

### The Solow Model. Savings and Leakages from Per Capita Capital. (n+d)k. sk^alpha. k*: steady state 0 1 2.22 3 4. Per Capita Capital, k

Savings and Leakages from Per Capita Capital 0.1.2.3.4.5 The Solow Model (n+d)k sk^alpha k*: steady state 0 1 2.22 3 4 Per Capita Capital, k Pop. growth and depreciation Savings In the diagram... sy =

### Name: Final Exam Econ 219 Spring You can skip one multiple choice question. Indicate clearly which one

Name: Final Exam Econ 219 Spring 2005 This is a closed book exam. You are required to abide all the rules of the Student Conduct Code of the University of Connecticut. You can skip one multiple choice

### Solution to Individual homework 2 Revised: November 22, 2011

Macroeconomic Policy Fabrizio Perri November 24 at the start of class Solution to Individual homework 2 Revised: November 22, 2011 1. Fiscal Policy and Growth (50p) After reviewing the latest figures of

### TRADE AND INVESTMENT IN THE NATIONAL ACCOUNTS This text accompanies the material covered in class.

TRADE AND INVESTMENT IN THE NATIONAL ACCOUNTS This text accompanies the material covered in class. 1 Definition of some core variables Imports (flow): Q t Exports (flow): X t Net exports (or Trade balance)

### Master Economics & Business Understanding the World Economy. Sample Essays and Exercices

Master Economics & Business Understanding the World Economy Sample Essays and Exercices Examples of short exercises 1. Decreasing Marginal Product of Capital and Depreciation Consider two sectors using

### Real GDP. Percentage of 1960 real GDP per capita. per capita. 2000 real GDP. (1996 dollars) per capita. Real GDP

KrugmanMacro_SM_Ch08.qxp 11/9/05 4:47 PM Page 99 Long-Run Economic Growth 1. The accompanying table shows data from the Penn World Table, Version 6.1, for real GDP in 1996 U.S. dollars for Argentina, Ghana,

### Economic Growth. Spring 2013

Economic Growth Spring 2013 1 The Solow growth model Basic building blocks of the model A production function Y t = F (K t, L t, A t ) This is a hugely important concept Once we assume this, then we are

### Exam 1. Corn (bushels)

ECONOMICS 10-008 Dr. John Stewart Feb. 13, 2001 Exam 1 Instructions: Mark the letter for your chosen answer for each question on the computer readable answer sheet using a No.2 pencil. Please note that

### Chapter 7: Economic Growth part 1

Chapter 7: Economic Growth part 1 Learn the closed economy Solow model See how a country s standard of living depends on its saving and population growth rates Learn how to use the Golden Rule to find

### 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts

Chapter 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Key Concepts Aggregate Supply The aggregate production function shows that the quantity of real GDP (Y ) supplied depends on the quantity of labor (L ),

### Econ 102 Aggregate Supply and Demand

Econ 102 ggregate Supply and Demand 1. s on previous homework assignments, turn in a news article together with your summary and explanation of why it is relevant to this week s topic, ggregate Supply

### Notes on the Theories of Growth

Notes on the Theories of Growth Economic Growth & Development These recitation notes cover basic concepts in economic growth theory relevant to the cases seen in class (Singapore, Indonesia, Japan, and

### Macroeconomics Lecture 1: The Solow Growth Model

Macroeconomics Lecture 1: The Solow Growth Model Richard G. Pierse 1 Introduction One of the most important long-run issues in macroeconomics is understanding growth. Why do economies grow and what determines

### I. MULTIPLE CHOICES. Choose the one alternative that best completes the statement to answer the question.

Econ 20B- Additional Problem Set I. MULTIPLE CHOICES. Choose the one alternative that best completes the statement to answer the question. 1. Which of the following is correct? a. Over the business cycle

### This paper is not to be removed from the Examination Halls

This paper is not to be removed from the Examination Halls UNIVERSITY OF LONDON EC2065 ZA BSc degrees and Diplomas for Graduates in Economics, Management, Finance and the Social Sciences, the Diplomas

### ECON 1010 Principles of Macroeconomics Exam #2. Section A: Multiple Choice Questions. (30 points; 2 pts each)

ECON 1010 Principles of Macroeconomics Exam #2 Section A: Multiple Choice Questions. (30 points; 2 pts each) #1. If the price level in the economy and the nominal wages both doubled, then real wages would

### Keywords: Overlapping Generations Model, Tax Reform, Turkey

SIMULATING THE TURKISH TAX SYSTEM ADEM İLERİ Middle East Technical University Department of Economics aileri@metu.edu.tr PINAR DERİN-GÜRE Middle East Technical University Department of Economics pderin@metu.edu.tr

### QUIZ 3 14.02 Principles of Macroeconomics May 19, 2005. I. True/False (30 points)

QUIZ 3 14.02 Principles of Macroeconomics May 19, 2005 I. True/False (30 points) 1. A decrease in government spending and a real depreciation is the right policy mix to improve the trade balance without

### University of Lethbridge Department of Economics ECON 1012 Introduction to Microeconomics Instructor: Michael G. Lanyi. Chapter 22 Economic Growth

University of Lethbridge Department of Economics ECON 1012 Introduction to Microeconomics Instructor: Michael G. Lanyi Chapter 22 Economic Growth 1) Economic growth is A) equal to real GDP per capita multiplied

### A Static Version of The Macroeconomics of Child Labor Regulation

A tatic Version of The Macroeconomics of Child Labor Regulation Matthias Doepke CLA Fabrizio Zilibotti niversity of Zurich October 2007 1 Introduction In Doepke and Zilibotti 2005) we present an analysis

### Capital Accumulation and Economic Growth

C H A P T E R 5 Capital Accumulation and Economic Growth Overview In this chapter we examine the relationship between increases in the capital stock and economic growth. We first discuss whether an economy

### Economic Growth. Chapter 11

Chapter 11 Economic Growth This chapter examines the determinants of economic growth. A startling fact about economic growth is the large variation in the growth experience of different countries in recent

### Problem 1. Steady state values for two countries with different savings rates and population growth rates.

Mankiw, Chapter 8. Economic Growth II: Technology, Empirics and Policy Problem 1. Steady state values for two countries with different savings rates and population growth rates. To make the problem more

### Learning Objectives. After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to:

Learning Objectives After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to: Discuss three characteristics of perfectly competitive

### POTENTIAL OUTPUT and LONG RUN AGGREGATE SUPPLY

POTENTIAL OUTPUT and LONG RUN AGGREGATE SUPPLY Aggregate Supply represents the ability of an economy to produce goods and services. In the Long-run this ability to produce is based on the level of production

### ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS

ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of July 14 Chapter 11 WRITE: [2] Complete the following labour demand table for a firm that is hiring labour competitively and selling its

Duration: 120 min INTRODUCTION TO ADVANCED MACROECONOMICS Preliminary Exam with answers September 2014 Format of the mock examination Section A. Multiple Choice Questions (20 % of the total marks) Section

### Pre-Test Chapter 7 ed17

Pre-Test Chapter 7 ed17 Multiple Choice Questions 1. Real GDP per capita: A. cannot grow more rapidly than real GDP. B. cannot grow more slowly than real GDP. C. necessarily grows more rapidly than real

### 1 National Income and Product Accounts

Espen Henriksen econ249 UCSB 1 National Income and Product Accounts 11 Gross Domestic Product (GDP) Can be measured in three different but equivalent ways: 1 Production Approach 2 Expenditure Approach

### Figure 1: Real GDP in the United States 1875-1993

Macroeconomics Topic 2: Explain the role of capital investment, education, and technology in determining economic growth. Reference: Gregory Mankiw s Principles of Macroeconomics, 2 nd edition, Chapter

### Problem Set #5-Key. Economics 305-Intermediate Microeconomic Theory

Problem Set #5-Key Sonoma State University Economics 305-Intermediate Microeconomic Theory Dr Cuellar (1) Suppose that you are paying your for your own education and that your college tuition is \$200 per

### Preparation course MSc Business&Econonomics: Economic Growth

Preparation course MSc Business&Econonomics: Economic Growth Tom-Reiel Heggedal Economics Department 2014 TRH (Institute) Solow model 2014 1 / 27 Theory and models Objective of this lecture: learn Solow

### VI. Real Business Cycles Models

VI. Real Business Cycles Models Introduction Business cycle research studies the causes and consequences of the recurrent expansions and contractions in aggregate economic activity that occur in most industrialized

### E-322 Muhammad Rahman. Chapter 7: Part 2. Subbing (5) into (2): H b(1. capital is denoted as: 1

hapter 7: Part 2 5. Definition of ompetitive Equilibrium ompetitive equilibrium is very easy to derive because: a. There is only one market where the consumption goods are traded for efficiency units of

### INVESTMENT DECISIONS and PROFIT MAXIMIZATION

Lecture 6 Investment Decisions The Digital Economist Investment is the act of acquiring income-producing assets, known as physical capital, either as additions to existing assets or to replace assets that

### The Budget Deficit, Public Debt and Endogenous Growth

The Budget Deficit, Public Debt and Endogenous Growth Michael Bräuninger October 2002 Abstract This paper analyzes the effects of public debt on endogenous growth in an overlapping generations model. The

### Towards a Structuralist Interpretation of Saving, Investment and Current Account in Turkey

Towards a Structuralist Interpretation of Saving, Investment and Current Account in Turkey MURAT ÜNGÖR Central Bank of the Republic of Turkey http://www.muratungor.com/ April 2012 We live in the age of

### Universidad de Montevideo Macroeconomia II. The Ramsey-Cass-Koopmans Model

Universidad de Montevideo Macroeconomia II Danilo R. Trupkin Class Notes (very preliminar) The Ramsey-Cass-Koopmans Model 1 Introduction One shortcoming of the Solow model is that the saving rate is exogenous

### Professor Christina Romer. LECTURE 17 MACROECONOMIC VARIABLES AND ISSUES March 17, 2016

Economics 2 Spring 2016 Professor Christina Romer Professor David Romer LECTURE 17 MACROECONOMIC VARIABLES AND ISSUES March 17, 2016 I. MACROECONOMICS VERSUS MICROECONOMICS II. REAL GDP A. Definition B.

### Macroeconomics 2. Technological progress and growth: The general Solow model. Mirko Wiederholt. Goethe University Frankfurt.

Macroeconomics 2 Technological progress and growth: The general Solow model Mirko Wiederholt Goethe University Frankfurt Lecture 3 irko Wiederholt (Goethe University Frankfurt) Macroeconomics 2 Lecture

### Douglas, Spring 2008 February 21, 2008 PLEDGE: I have neither given nor received unauthorized help on this exam.

, Spring 2008 February 21, 2008 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Midterm 1 1. What will happen to the equilibrium price of hamburgers

### Neoclassical growth theory

Chapter 1 Neoclassical growth theory 1.1 The Solow growth model The general questions of growth: What are the determinants of long-run economic growth? How can we explain the vast differences in both output

III. INTERNATIONAL TRADE A. Gains from Trade -- a history of thought approach 1. The idea of mercantilism (15-175) argued that a country s well-being is directly tied to the accumulation of gold and silver.

### International Economics Fall 2011 Exchange Rate Determination, Part 2. Paul Deng Sept. 29 & Oct. 4, 2011

International Economics Fall 2011 Exchange Rate Determination, Part 2 Paul Deng Sept. 29 & Oct. 4, 2011 1 What to Do With The Huge Trade Surplus? China s FX reserves reached \$3.2 trillion in 2011 70% of

### GDP: The market value of final goods and services, newly produced WITHIN a nation during a fixed period.

GDP: The market value of final goods and services, newly produced WITHIN a nation during a fixed period. Value added: Value of output (market value) purchased inputs (e.g. intermediate goods) GDP is a

### Chapters 7 and 8 Solow Growth Model Basics

Chapters 7 and 8 Solow Growth Model Basics The Solow growth model breaks the growth of economies down into basics. It starts with our production function Y = F (K, L) and puts in per-worker terms. Y L

### Final. 1. (2 pts) What is the expected effect on the real demand for money of an increase in the nominal interest rate? How to explain this effect?

Name: Number: Nova School of Business and Economics Macroeconomics, 1103-1st Semester 2013-2014 Prof. André C. Silva TAs: João Vaz, Paulo Fagandini, and Pedro Freitas Final Maximum points: 20. Time: 2h.

### BADM 527, Fall 2013. Midterm Exam 2. Multiple Choice: 3 points each. Answer the questions on the separate bubble sheet. NAME

BADM 527, Fall 2013 Name: Midterm Exam 2 November 7, 2013 Multiple Choice: 3 points each. Answer the questions on the separate bubble sheet. NAME 1. According to classical theory, national income (Real

### Chapter 25. Questions

Chapter 25 Questions 4. Expansionary gaps tend to raise inflation, and recessionary gaps tend to reduce it. If an expansionary gap exists, for example, firms are producing above normal capacity. Eventually

### MA Macroeconomics 10. Growth Accounting

MA Macroeconomics 10. Growth Accounting Karl Whelan School of Economics, UCD Autumn 2014 Karl Whelan (UCD) Growth Accounting Autumn 2014 1 / 20 Growth Accounting The final part of this course will focus

Advanced International Economics Prof. Yamin Ahmad ECON 758 Sample Midterm Exam Name Id # Instructions: There are two parts to this midterm. Part A consists of multiple choice questions. Please mark the

### Chapter 13. Aggregate Demand and Aggregate Supply Analysis

Chapter 13. Aggregate Demand and Aggregate Supply Analysis Instructor: JINKOOK LEE Department of Economics / Texas A&M University ECON 203 502 Principles of Macroeconomics In the short run, real GDP and

### Pre-Test Chapter 18 ed17

Pre-Test Chapter 18 ed17 Multiple Choice Questions 1. (Consider This) Elastic demand is analogous to a and inelastic demand to a. A. normal wrench; socket wrench B. Ace bandage; firm rubber tie-down C.

### Name: Date: 3. Variables that a model tries to explain are called: A. endogenous. B. exogenous. C. market clearing. D. fixed.

Name: Date: 1 A measure of how fast prices are rising is called the: A growth rate of real GDP B inflation rate C unemployment rate D market-clearing rate 2 Compared with a recession, real GDP during a

### Endogenous Growth Theory

Endogenous Growth Theory Motivation The Solow and Ramsey models o er valuable insights but have important limitations: Di erences in capital accummulation cannot satisfactorily account for the prevailing

### THE CORRELATION BETWEEN UNEMPLOYMENT AND REAL GDP GROWTH. A STUDY CASE ON ROMANIA

THE CORRELATION BETWEEN UNEMPLOYMENT AND REAL GDP GROWTH. A STUDY CASE ON ROMANIA Dumitrescu Bogdan Andrei The Academy of Economic Studies Faculty of Finance, Insurance, Banking and Stock Exchange 6, Romana

### Pre-Test Chapter 25 ed17

Pre-Test Chapter 25 ed17 Multiple Choice Questions 1. Refer to the above graph. An increase in the quantity of labor demanded (as distinct from an increase in demand) is shown by the: A. shift from labor

### Econ 303: Intermediate Macroeconomics I Dr. Sauer Sample Questions for Exam #3

Econ 303: Intermediate Macroeconomics I Dr. Sauer Sample Questions for Exam #3 1. When firms experience unplanned inventory accumulation, they typically: A) build new plants. B) lay off workers and reduce

### Economics 100 Exam 2

Name: 1. During the long run: Economics 100 Exam 2 A. Output is limited because of the law of diminishing returns B. The scale of operations cannot be changed C. The firm must decide how to use the current

### Economic Growth: Theory and Empirics (2012) Problem set I

Economic Growth: Theory and Empirics (2012) Problem set I Due date: April 27, 2012 Problem 1 Consider a Solow model with given saving/investment rate s. Assume: Y t = K α t (A tl t ) 1 α 2) a constant

### PART A: For each worker, determine that worker's marginal product of labor.

ECON 3310 Homework #4 - Solutions 1: Suppose the following indicates how many units of output y you can produce per hour with different levels of labor input (given your current factory capacity): PART

### Question 1: Deriving and Solving the IS-LM Model (closed economy)

ECON 222 Macroeconomic Theory I Fall Term 2010 Assignment 4 Due: Drop Box 2nd Floor Dunning Hall by noon November 26th 2010 No late submissions will be accepted No group submissions will be accepted No

### 4. Which of the following are available in limited quantity and contribute to the problem of scarcity?

1. Given that resources are scarce: A) A "free lunch" is possible but only for a limited number of people B) Poor countries must make choices but rich countries do not have to make choices C) Opportunity

### Ghana South Korea United States. Real GDP per capita (2005 dollars) Per centage of 1960 real GDP per capita. 2009 real GDP per capita

Long-Run Economic Growth chapter: 24 9 ECONOMICS MACROECONOMICS 1. The accompanying table shows data from the Penn World Table, Version 7.0, for real GDP in 2005 U.S. dollars for Argentina, Ghana, South

### ECON 5110 Class Notes Overview of New Keynesian Economics

ECON 5110 Class Notes Overview of New Keynesian Economics 1 Introduction The primary distinction between Keynesian and classical macroeconomics is the flexibility of prices and wages. In classical models

### Households Wages, profit, interest, rent = \$750. Factor markets. Wages, profit, interest, rent = \$750

KrugmanMacro_SM_Ch07.qxp 11/9/05 4:47 PM Page 87 Tracking the Macroeconomy 1. Below is a simplified circular-flow diagram for the economy of Micronia. a. What is the value of GDP in Micronia? b. What is

### Chapter 4 Technological Progress and Economic Growth

Chapter 4 Technological Progress and Economic Growth 4.1 Introduction Technical progress is defined as new, and better ways of doing things, and new techniques for using scarce resources more productively.

### ON THE DEATH OF THE PHILLIPS CURVE William A. Niskanen

ON THE DEATH OF THE PHILLIPS CURVE William A. Niskanen There is no evidence of a Phillips curve showing a tradeoff between unemployment and inflation. The function for estimating the nonaccelerating inflation

### CHAPTER 4 Labor Demand Elasticities

CHAPTER 4 Labor Demand Elasticities In addition to the multiple choice problems listed below, complete the following end of chapter questions: Review questions 1,3, 4, 6 and 7. Problems 1, 2, 3 and 5.

### Long run v.s. short run. Introduction. Aggregate Demand and Aggregate Supply. In this chapter, look for the answers to these questions:

33 Aggregate Demand and Aggregate Supply R I N C I L E S O F ECONOMICS FOURTH EDITION N. GREGOR MANKIW Long run v.s. short run Long run growth: what determines long-run output (and the related employment

### I. Introduction to Aggregate Demand/Aggregate Supply Model

University of California-Davis Economics 1B-Intro to Macro Handout 8 TA: Jason Lee Email: jawlee@ucdavis.edu I. Introduction to Aggregate Demand/Aggregate Supply Model In this chapter we develop a model

### Competitive Market Equilibrium

Chapter 14 Competitive Market Equilibrium We have spent the bulk of our time up to now developing relationships between economic variables and the behavior of agents such as consumers, workers and producers.

### Profit Maximization. 2. product homogeneity

Perfectly Competitive Markets It is essentially a market in which there is enough competition that it doesn t make sense to identify your rivals. There are so many competitors that you cannot single out

### Taxes and Subsidies PRINCIPLES OF ECONOMICS (ECON 210) BEN VAN KAMMEN, PHD

Taxes and Subsidies PRINCIPLES OF ECONOMICS (ECON 210) BEN VAN KAMMEN, PHD Introduction We have already established that taxes are one of the reasons that supply decreases. Subsidies, which could be called

### ECON 4423: INTERNATIONAL FINANCE

University of Colorado at Boulder Department of Economics ECON 4423: INTERNATIONAL FINANCE Final Examination Fall 2005 Name: Answer Key Student ID: Instructions: This test is 1 1/2 hours in length. You

### EXOGENOUS GROWTH MODELS

EXOGENOUS GROWTH MODELS Lorenza Rossi Goethe University 2011-2012 Course Outline FIRST PART - GROWTH THEORIES Exogenous Growth The Solow Model The Ramsey model and the Golden Rule Introduction to Endogenous

### Elements of probability theory

The role of probability theory in statistics We collect data so as to provide evidentiary support for answers we give to our many questions about the world (and in our particular case, about the business

### Chapter 12: Gross Domestic Product and Growth Section 1

Chapter 12: Gross Domestic Product and Growth Section 1 Key Terms national income accounting: a system economists use to collect and organize macroeconomic statistics on production, income, investment,