Consider the outcome of an economy in the long-run with N = 10000 potential workers who maybe employed or unemployed. Suppose that the aggregate production function iswhere Y is real GDP, L is the number of employed people and A aggregate productivity. Assumethat K = 1, the initial productivity level is A = 1Y = AK L = AL",Further suppose that the job separation rate is s= 0.04 and the job finding rate is f = 0.75. Recallthe firm's marginal product of labour (MPL) is given byAMPL = xL¹-awhere & is the share of labour in the economy and equal to 0.66.On the demand-side, suppose that the consumption and investment functions are, respectively,C=C+ c(YT) = 40 +0.55(Y – T)I = Ī + i(r) = 180 - 1200r.where r is the real interest rate. Assume government purchases are G=To summarize,N = 10000,f = 0.75,Finally, suppose that monetary base is B = 1000, that reserve ratio is rr = 0.1 and the currencydeposit ration is cr = 0.5.s = 0.04, G = 100, BĪ = 150,rr = 0.1,100, and taxes are T=1000,=cr=0.5150.1. Calculate the long-run equilibrium. For this, you need to find the equilibrium values of Y,W/P, C, S, r and I.

Given, N = 10000 ; population s = 0.04; savings rate G = 100; government spending B = 1000;…

Answered: N = 10000, f = 0.75, s = 0.04, G = 100,…

N = 10000, f = 0.75, s = 0.04, G = 100, T = 150, rr = 0.1, B = 1000, cr=0.5 1. Calculate the long-run equilibrium. For this, you need to find the equilibrium values of Y, W/P, C, S, r and I.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider the outcome of an economy in the long-run with N = 10000 potential workers who may
be employed or unemployed. Suppose that the aggregate production function is
where Y is real GDP, L is the number of employed people and A aggregate productivity. Assume
that K = 1, the initial productivity level is A = 1
Y = AK L = AL",
Further suppose that the job separation rate is s= 0.04 and the job finding rate is f = 0.75. Recall
the firm's marginal product of labour (MPL) is given by
A
MPL = x
L¹-a
where & is the share of labour in the economy and equal to 0.66.
On the demand-side, suppose that the consumption and investment functions are, respectively,
C=C+ c(YT) = 40 +0.55(Y – T)
I = Ī + i(r) = 180 - 1200r.
where r is the real interest rate. Assume government purchases are G
=
To summarize,
N = 10000,
f = 0.75,
Finally, suppose that monetary base is B = 1000, that reserve ratio is rr = 0.1 and the currency
deposit ration is cr = 0.5.
s = 0.04, G = 100, B
Ī = 150,
rr = 0.1,
100, and taxes are T
=
1000,
=
cr=0.5
150.
1. Calculate the long-run equilibrium. For this, you need to find the equilibrium values of Y,
W/P, C, S, r and I.

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