11. Consider the IS-MP model. Following an increase in the marginal product of capital, the IS curve the MP curve a. b. C. Shifts to the left; Shifts downward Shifts to the right; Does not shift Does not shift; Shifts upward d. e. Shifts to the left; Shifts upward Does not shift; Shifts downward and
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- 2) The below five graphs show the development of key macroeconomic variables over the scope of three years in a certain country. Use them to draw an IS-LM-PC graph that captures the development in this country. Explain carefully what has happened. G Y t 3) China currently (2016) has a household saving rate of about 36 %. It has never been below 27 % in the last 30 years. What role do you think this high saving rate has for China's economic success? It has been argued that the low standard of living in many less developed countries depend on their poor institutions. Explain carefully what kind of "institutions" this argument refers to. 4) 5) The Swedish Fiscal Policy Council discusses public debt policy in a low interest environment in their latest report. The argue that "there are strong arguments in favour of low public debt despite low interest rates. For private operators, it may be rational to increase debt in a low interest rate climate, but this is not necessarily the case for…1. Supose that·Total Factor Productivity increases·Capital depreciates by 10%Everything else equal, what happens to labor demand in the economy?A. It decreases (i.e. shifts to the left of the demand curve)B. It increases (i.e. shifts to the right of the demand curve)C. Not enough information to answer 2. Does an increase in the wage causes leisure always to increase, because leisure is a normal good?A. YesB. NoC. Only if the substitution effect dominates the income effectD. Only if the income effect dominates the substitution effectAssume that an economy operates according to the sticky-wage model. The nominal wagewas set to make labor supply and labor demand equal when the expected price levelequaled 120 (as measured by the consumer price index).a. Use a graph of the labor market to illustrate what happens to the quantity oflabor employed if the actual price level over the time period when wages arestuck equals 110.b. Use a graph of the production function to illustrate how the quantity of outputproduced changes if the actual price level equals 110 when the expected pricelevel is 120.c. Given the unexpectedly low price level, will this economy be operating above,below, or at the natural rate?
- 12. Assume that an economy operates according to the sticky-wage model. The nominal wage was set to make labor supply and labor demand equal when the expected price level equaled 120 (as measured by the consumer price index). a. Use a graph of the labor market to illustrate what happens to the quantity of labor employed if the actual price level over the time period when wages are stuck equals 110. b. Use a graph of the production function to illustrate how the quantity of output produced changes if the actual price level equals 110 when the expected price level is 120. c. Given the unexpectedly low price level, will this economy be operating above, below, or at the natural rate?Which of the following doesn't have increasing function? O a. Saving function O b. Consumption function O c. Expenditure function O d. None of theseHow do increases in technology affect the aggregate production funclion? O A. With better technology, the aggregate production function shifts down because fewer workers are neoded O B. Even with technology increases, the aggregate production function will remain constant unless the technology increases are matched by increases in the physical capital stock. O C. As technology increases, diminishing marginal product sets in such that each unit of technology produces less output O D. With increases in technology, the aggregate production function shitfts up, indicating more output is produced from the same amount of inputs.
- Why does substitution bias arise if we calculate the inflation rate based on a fixed basket of goods?Suppose an economy can be represented by the folowing table, in which employment is in millons of workers and GDP and AE are expressed in billions of dollars: Employment 100 Real GDP Aggregate Expenditures 1275 1350 1425 1500 1575 1650 1200 105 1300 1400 1500 1600 1700 110 115 120 125 fut employment is 120 milion workers? What is its what kind of expenditure oap exists size? Suppose government spending, taxes, and net exports ane all independent of the level of rcal GDP. What is the multplier an ths economy? below the econemy's potential, what is the size of the recessionary expenditure qapteconomic Suppose that an economy’s production function is Cobb–Douglas with parameter a=0.3. a. What fractions of income do capital and labor receive? b. Suppose that immigration increases the labor force by 10 percent.What happens to total output (in percent)? The rental price of capital? The real wage? c. Suppose that a gift of capital from abroad raises the capital stock by 10 percent.What happens to total output (in percent)? The rental price of capital? The real wage? d. Suppose that a technological advance raises the value of the parameter A by 10 percent. What happens to total output (in percent)? The rental price of capital? The real wage?
- Let's say that Americans decide that home ownership isn't worth it anymore; instead, they all just move in with their parents. If Americans quit buying homes, this will cause AS to shift leftward due to a drop in consumption AS to shift leftward due to a drop in economic investment AD to shift leftward due to a drop in consumption AD to shift leftward due to a drop in economic investment is a venent policy ait illaue by a computer. Ine interest rate, amount to buy or sell in open market operations, etc., are all determined by an equation put into the computer. This approach is not supported by any American economists based on discretion O called rule-based policy described by all listed optionsThe empirical evidence suggests that in the United States, the real wage rate is: Countercyclical Acyclical Bicyclical Procyclical4. In an economy that works in accordance with the classical model, the production function is: Y=2KO L°, and both the quantity of labour and capital are 100 units. The marginal product of labour can be written as MPL-KSL0,5. Answer in the table below. a) Calculate GDP. b) Calculate the percentage of labour income within GDP. c) Calculate the equilibrium real wage. a) GDP: b) percantage of labour income: c) equlibrium real wage: