Given AD1 and AS1 in Figure 8.3, the Monetary Approach to achieving full employment at an output of $300 billion would be to: AS, P, AS AD AD 100 200 300 400 Real Output (billions of dollars per year) O Increase the discount rate so as to shift AD1 to AD2. Decrease the discount rate so as to shift AD1 to AD2. Do nothing and wait for "natural" market forces to achieve full employment. Decease the money supply. Price Level

Given AD1 and AS1 in Figure 8.3, the Monetary Approach to achieving full employment at an output of $300 billion would be to: AS, P, AS AD AD 100 200 300 400 Real Output (billions of dollars per year) O Increase the discount rate so as to shift AD1 to AD2. Decrease the discount rate so as to shift AD1 to AD2. Do nothing and wait for "natural" market forces to achieve full employment. Decease the money supply. Price Level

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter17: Capital And Time

Section: Chapter Questions

Problem 17.2P

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1) Suppose the marginal product of labor in the economy is given by MPN = 0.005(18,000 005N), while the supply of labor is 2000 rate and level of employment. (b) What happens to the wage rate and employment if wealth rises, reducing the supply of labor to 200 + 1000w? + 1000w. (a) Find the market-clearing real wage
Figure below illustrates the effects of an increase in the real wages for the representative consumer in a one-period work-leisure model. Which of the following statements correctly explains the entire effects of an increase in the real wage? C2 K Leisure, / O A. budget line shift out, slope changed, real wage decreased, increases consumption, decreases leisure, decrease labor supply. O B. budget line rotates outward, slope changed, real wage increased, increases consumption, leisure may increase or decrease, labor supply may increase or decrease. O C. budget line rotates outward, slope unchanged, real wage changed, increases consumption, increases leisure, increases labor supply. O D. budget line shift out, slope unchanged, real wage unchanged, decreases consumption, decreases leisure, increases labor supply. Consumption, C
d-f please
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Consider the market for loanable funds. Suppose the demand for loans is given by i 100-30+, and the supply of loans is given by i= -20+Q+m, where represents inflation. In the case of m=5, what is the equilbrium quantity of loans and what is the corresponsing interest rate? O Q*=30,1"=5 ⒸQ=30,1" 15 O Q=35,1"=10 O Q*35, 1-2 An example of an adverse selection problem in the context of obtaining a loan would be Those individuals who are more likely to default turn out to be first in line for a loan, while the most trustworthy individuals select themselves out of the market for a loan. An untrustworthy person who decides to save money at a specific bank. O An untrustworthy individual who offers to lend money to a bank. A potential borrower not disclosing information conerning the risk or their project which would have otherwise lead the bank to not lend the money. Consider the market for loanable funds. Suppose the demand for loans is given by i= 100-30+, and the supply of loans is given by…
1. An economy's firms produce goods along the Cobb-Douglas production function: Y = A * K^0.5 * L^0.5 For it, the marginal product of a worker is MPL = 0.5 * A * K^0.5 / L^0.5, in which K = 16 Workers bargain for wage by looking at the rate of unemployment and inflationary surpise: w = 2 * EP/P *L^0.5 K = 16. The economy is in equilibrium at EP=P=1 and A=9. In it, the number of workers is L=9 and the wage is =6. Now, thanks to temporarily abundant oil, the productivity changed from A=9 to A=16. Find the new equilibrium number of workers. 2. Find the new equilibrium wage at A=16. 3. Graph the change in the labor market equilibrium. Mark the before and after equilibria with E0 and E1. Label axes and curves, map relevant values onto axes.
a. Based on only the first-order condition with respect to labor computed in part a (Based on the given Lagrangian, compute the representative consumer's first-order conditions with respect to consumption and with respect to labor). Qualitatively sketch two things in a diagram with the real wage on the vertical axis and labor on the horizontal axis. First, the general shape of the relation ship between w and n (perfectly vertical, perfectly horizontal, upward-sloping, downward-sloping, or impossible to tell). Second, how changes in / affect the relationship (shift it outward, shift it in inward, or impossible to determine). Briefly describe the economics of how you obtained your conclusions. (Note: In this question you are not to use the first-order condition with respect to consump tion nor any other conditions.) b. Now based on both of the two first-order conditions computed in part a, construct the consumption-leisure optimality condition. Clearly present the important steps and…
Consider the market for loanable funds. Suppose the demand for loans is given be i=9-Q+π, and the supply of loans is given by i=Q/2+π, where π represents inflation. Now suppose that π=5 (instead of 3, in the previous problem). What is the equilbrium quantity of loans and what is the corresponsing interest rate? Q*=8, i*=6 Q*=3, i*=6 Q*=6, i*=8 Q*=6, i*=6
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For the following questions, consider the figure below. Initially, the economy is at the equilibrium in point A. LDo ($) Wage ܀ ܩ ܥ ܘ ܘ ܨ ܩ 14 12 8 6 4 2 +1 67 R 9 10 4 LS LD Quantity of labor lin millions) a. If a crisis moves the labor demand to the curve LD₁ and wages are flexible, what is the new equilibrium wage? What is the new equilibrium wage if wages are downward rigid? b. If an overheated economy moves the labor demand to the curve LD2, will the unemployment rate change? What do you expect to happen with the price levels? Explain why this situation is also a problem for the policy-maker. c. Cite one fiscal policy and one monetary policy that the government or the Fed can enact to reduce the rate of inflation. Be specific.