Question

The production function in an economy
is Y = 2(7N-0.02N^{2}) With this production function, the
marginal product of labor is .mpn = 14 - .08N.

Labor Supply is *, N ^{8} =
88+2w,*

Desired consumption is *,
C ^{d}=100+0.8Y -5020r -.5G,*

Desired investment is
*I ^{d}=100-500r*

Real money demand is M^{d}/P =
Y-2000 (r+?^{e})

Other variables are expected inflation
?^{e}=.05 *,* government purchases *G = 200*,
and money supply is M = 2100

1. Find the general equilibrium values of the real wage, employment, and the output.

2. For any given level of output, Y, find an equation for IS curve, i.e. write r as a function of Y.

3. For any given level of output Y and price level P, find an equation for LM curve, i.e. write r as function of Y and P.

Answer #1

5) The economy has an aggregate production function
fN=15N-12N2 , where N is labor
input. Labor supply is given by
NsWP=-5+3WP ,
where W is the money wage and P is the price level. Desired
consumption depends on real income, Y, and can be written as
CdY=10+0.7Y . Given real
interest rate, r, the desired investment is
Idr=30-200r . The real money
demand is characterized by LY,r=10+Y-200r . Government spending, G,
and nominal money stock, M, is given as G=0...

Suppose that you have the following production function:
Y=9K0.5N0.5. With this production function the marginal product of
labor is MPN=4.5K0.5N-0.5 (hint: firms pay workers MPN so this
equals w). The capital stock is K=25. The labor supply curve is
NS=100[(1-t)]w]2 , where w is the real wage, t is the tax on
income, and hence (1-t)w is the after-tax real wage rate.
a) Graphically draw (a rough sketch is fine) of the labor market
and production function. Show graphically the...

2) Consider the following Keynesian model of the economy.
Consumption Function: C = 12 + .6 Y d,
Investment Function: I = 25 − 50 r,
Government Spending: G = 20,
Tax Collections: T = 20,
Money Demand Function: L d = 2 Y − 200 r,
Money Supply: M = 360,
Price Level: P = 2.
a) Find an expression for the IS curve and plot it.
b) Find an expression for the LM curve and plot it.
c)...

Consider the following Keynesian (short-run) model along with
the Classical (long-run) model of the economy.
Labor Supply: Le = 11
Capital Supply: K=11
Production Function:
Y-10K.3(Le).7
Depreciation Rate: &=.1
Consumption Function: C=12+.6Yd
Investment Function: I= 25-50r
Government Spending: G=20
Tax Collections: T=20
Money Demand Function: Ld=
2Y-200r
Money Supply: M=360
Price Level: P=2
Find an expression for the IS curve and plot it.
Find an expression for the LM curve and plot it.
Find the short run equilibrium level of...

Suppose that economy of Portugal is characterized by the
following C = 200 + 0.5 (Y - T) Represents the consumption function
I = 600 – 30 r represents the investment function G = 300
represents the public spending T = 300 represents the level of
taxation (m/p)d = y - 40 r represents the money demand function
(m/p)s = 1500 r represents the real money supply d Y represents the
global output Find the IS curve the LM curve...

Suppose desired consumption and desired investment are
?? = 300 + 0.75(? − ?) − 300?
T = 100 + 0.2Y
?? = 200 − 200?
G is the level of government purchases and G=600
Money demand is
?? ?
= 0.5? − 500(? + ??)
where the expected rate of inflation, ??, is 0.05. The nominal
supply of money M = 133,200.
Suppose the full employment output is 2500 and the price level in
the short run is 120....

Suppose that the following equations
describe an economy.
Y = Cd +
Id + G
Cd = 180 +
0.8(Y – T)
Id = 140 –
8r + 0.1Y
T = 400
G = 400
(Md/P) = 6Y – 120i
MS = 6000 i = πe +
r
Assume expected inflation
πe = 0 and price level P = 1.
Find the equation for the IS curve.
Find the equation for the LM curve.
Find the equilibrium values for output...

Suppose the economy is described by the following equations:
C = 350 + .7(Y – T)
I = 100 + .1Y - 1000i
G = 500; T = 500
Money Supply (M/P)s = 3200
Money Demand (M/P)d = 2Y – 4000i
a.Write an equation for the IS relation.
b.Write an equation for the LM relation.
c.Find the equilibrium levels of Y and i.
d.Write the Aggregate Demand equation for this economy with Y
as a function of P.
e. Suppose...

3. Using the following information about the current
economy:
C = 130 + 0.80(Y-T) where: C: consumption, Y: output
I = 680 -1200r T: taxes, I: Investment, r: real interest rate
T = 70 G: government
G = 110
(M/P) d = 0.6Y – 960r where: (M/P) d : money demand
Ms = 2364 Ms: money supply
P = 1.0 P: price level
(You must show the steps to derive these answers.)
a. Derive the equation for the IS curve...

2. Assume that the equilibrium in the
money market may be described as M/P =
0.5Y – 100r, and M/P equals
800. this is one question unfortunately.
Write the LM curve two ways, expressing Y as
a function of r and r as a function of
Y.
What is the slope of the LM curve?
If real money balance M/P increases to 1200,
what is a new LM curve?
Graphically illustrate LM curve from part
a and new LM curve...

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