157.In an economy with flexible prices, competitive factor markets, and fixed supplies of the factors of production, graphically illustrate the impact of a deadly virus that kills a large part of the labor force, but leaves the other factors of production untouched, ceteris paribus. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curves shift; and v. the terminal equilibrium values. Explain in words how the equilibrium values change.
157.In an economy with flexible prices, competitive factor markets, and fixed supplies of the factors of production, graphically illustrate the impact of a deadly virus that kills a large part of the labor force, but leaves the other factors of production untouched, ceteris paribus. Be sure to label: i. the axes; ii. the
158.Assume that the production function is given by Y = AK0.5L0.5, where Y is
a.What is Y?
b.What is the real wage of labor?
c.What is the real rental price of capital (the amount of output paid per unit of capital)?
159.Assume that GDP (Y) is 6,000. Consumption (C). is given by the equation C = 600 + 0.6(Y – T). Investment (I) is given by the equation I = 2,000 – 100r, where r is the real rate of interest in percent. Taxes (T) are 500 and government spending (G) is also 500.
a.What are the equilibrium values of C, I, and r?
b.What are the values of private saving,
c.If government spending rises to 1,000, what are the new equilibrium values of C, I, and r?
d.What are the new equilibrium values of private saving, public saving, and national saving?
160.Assume that GDP (Y) is 5,000. Consumption (C). is given by the equation C = 1,000 + 0.3(Y – T). Investment (I) is given by the equation I = 1,500 – 50r, where r is the real interest rate in percent. Taxes (T) are 1,000 and government spending (G) is 1,500.
a.What are the equilibrium values of C, I, and r?
b.What are the values of private saving, public saving, and national saving?
c.Now assume there is a technological innovation that makes business want to invest more. It raises the investment equation to I = 2,000 – 50r. What are the new equilibrium values of C, I, and r?
d.What are the new values of private saving, public saving, and national saving?
161.Assume that GDP (Y) is 5,000. Consumption (C). is given by the equation C = 1,200 + 0.3(Y – T) – 50r, where r is the real interest rate. Investment (I) is given by the equation I = 1,500 – 50r. Taxes (T) are 1,000 and government spending (G) is 1,500.
a.What are the equilibrium values of C, I, and r?
b.What are the values of private saving, public saving, and national saving?
c.Now assume there is a technological innovation that makes business want to invest more. It raises the investment equation to I = 2,000 – 50r. What are the new equilibrium values of C, I, and r?
d.What are the new values of private saving, public saving, and national saving?
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