MANKIW: PRINCIPLES OF MACROECONOMICS
8th Edition
ISBN: 9781337801782
Author: Mankiw
Publisher: CENGAGE L
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Chapter 22, Problem 8PA
Sub part (a):
To determine
The changes in aggregate supply and demand on aggregate supply curve , aggregate demand curve, and Phillips curve .
Sub part (b):
To determine
The changes in aggregate supply and demand on aggregate supply curve, aggregate demand curve, and Phillips curve.
Sub part (c):
To determine
The changes in aggregate supply and demand on aggregate supply curve, aggregate demand curve, and Phillips curve.
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For the two questions, use the provided Lorenz curve.
Income
100%
Lorenz curve
If the economy's income were distributed according
to the Equality line, what would the Gini coefficient
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1
0
0.5
Infinity
80
60
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60
10
40
If the economy's income were distributed according
to the A line, how much of the economy's income is
earned by the third quintile of families?
60%
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100%
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Equality
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A
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1. For the following utility functions, (i) calculate the MRS, (ii) show whether the MRS is constant, or
diminishing, or increasing, (iii) calculate the degree of homogeneity, (iv) check the convexity of the
Indifference Curve using the condition that for a function to be strict quasi-concave, it must be that
f2f11-2f1f2f12+ ff22 < 0, (v) based on MRS's characteristics, draw an approximate Indifference
Curve, and (vi) comment on the type of utility function.
(a) U(x, y) = 3x + y
(b) U(x, y)=√√x y
(c) U(x, y)=√√x + y
(d) U(x, y)=xy
x+y
A
9R, where
1-b 1-b
Question Two Consider the IS-LM Model. Let the IS equation be Y =
(1b) is the marginal propensity to save, g is the investment sensitivity to interest rates,
and A is an aggregate of exogenous variables. Let the LM equation be Y = +=R, where
k and 1 are income and interest sensitivity of money demand, and Mo is real money balances.
Mo
k k
It is given b
=
0.7, g = 100, A = 252, k = 0.25, l = 200, and Mo 176.
a) Utilize the given numbers to substitute the variables in the model, and then write
down the IS-LM equation system in matrices form.
b) Solve for the equilibrium values of Y and R using Cramer's Rule.
(Note: Keep 2 digits after the decimal point.)
Chapter 22 Solutions
MANKIW: PRINCIPLES OF MACROECONOMICS
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