Order Description
Just answer each of questions, one by one.
1.Consider how each of the following events is likely to affect real GDP. Do you think the change in real GDP reflects a similar change in economic weill-being?(determine whether real GDP rises,falls or remains the same, and explain why.)
?a?A hurricane in Ontario forces Canada’s Wonderland to shut down for a moth.
(b) The discovery of a new, easy-to-grow strain of wheat increase farm harvests.
(c) More high-school students drop out of school to take jobs mowing lawns.
2.According to the neoclassical theory of distribution, the real wage earned by any worker equals that worker’s marginal productivity. let’s use this insight to examine the incomes of two groups of workers: farmers and barbers.(Note that the form of the real wages are Wf/Pf and Wb/Pb. PF is $/(unit of farm output) and Pb is ($/haircut.)
(a) over the past century, the productivity of farmers has risen substantially because of technological progress. According to the neoclassical theory, what should have happened to their real wage?
(b)Over the same period, the productivity of barbers has remained constant. That should have happened to their real wage?
(c)What do your previous answers imply for the price of haircuts relative to the price of food?
3. Consider an economy described by the following equations:
Y=C+I+G,
Y=5000,
G=1000,
T=1000,
C=250+075(Y-T),
I=1000-50r
(a) In this economy, computer private saving, public saving, and national saving.
(b) Find the equilibrium interest rate (measured in percentage points.)
(c) Find the new equilibrium interest rate.
4.Suppose that consumption depends on the level of real money balances(on the grounds that real money balances are part of wealth). Show hat if real money balances depend n the nominal interest rate, then an increase in the rate of money growth affects consumption,investment, and the real interest rate. Does the nominal interest rate adjust more than one-for-one or less than one-for-one to expected inflation?
5. The country of Leverett is a small open economy. Suddenly, a change in world fashions makes the exports of Leverett unpopular.
(a) What happens in Leverett ti saving, investment, net exports, the interest rate, and the exchange rate?
(b) The citizens of Levertt like to travek abroad. How will this change in the exchange rate affect them?
(c)The fiscal policymakers of Leverett what to adjust taxes to maintain the exchange rate at its previous level. What should they do? If hey do this, what are the overall effects on saving, investment, net exports, and the interest rate?
