Question

A) what variables adjust in a neoclassical model to ensure demand equals supply in the goods market?

(real interest rate, price level, real rental rate of capital, real wage)

B) If nominal GDP grew at a rate of 7% and deflator rose just 3% then real GDP increases or decreases by what?

C)computing real GDP uses (quantities, expenditure weights, prices, both price and quantities, depreciation)

D)if the personal production function is Y=3k^(1/2) and the rate in which is is saved is (s) =.3 whilst the depreciation rate is .1 compute the steady state level of output per person

Answer 1

Ans

A). In neoclassical model assume that market will come to the equilibrium if there is any disturbance in demand and supply by the changes in the "price level"

C) Real gdp is computed by both price and quantity. Price is of base year and quantity is of current year.