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Economics

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Feb 20, 2024

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Q1 A manufacturer of toys is employing 50 workers and using 15 pieces of equipment to assemble toys. Currently, the marginal product of labor is 5 $ and the marginal product of capital is 25 $. Assume the market prices for labor and capital are $12 and $20, respectively. 3 Points Q1.1 Is this firm maximizing its profit? 1 Point Q1.2 (1) 1 Point What should this firm do with respect to its employees and its use of equipment? The firm should (1) _ the number of employees Q1.3 (2) 1 Point and (2) _ its use of equipment. Yes No Maintain Reduce Increase Maintain Reduce Increase

Q2 Assume that the marginal product of labor is given by the following expression: 2 Points where L is measured in millions. Q2.1 What is the marginal product of labor when L equals 80 million? 1 Point MPL = 14 (Round your response to the nearest whole number.) Q2.2 Determine the equilibrium real wage if the labor supply equals 100 million workers . 1 Point The equilibrium real wage = w = 13 (Round your response to the nearest whole number.)

Q3 Suppose an economy has total income of $ 8 trillion, where total labor income equals $ 6 trillion and capital income equals $2.00 trillion. What is the value of the exponent on labor using a Cobb-Douglas production function? 1 Point Labor income share is 0.75 (Round your response to the two decimal places.)

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Q4 Suppose that you work at the statistical oﬃce of a given country. The following graph plots estimates of the labor and capital income shares for that country over time. 1 Point Your boss suggests that a Cobb-Douglas production function could be a good representation of that country's income. Is your boss right? No, if it were a Cobb-Douglas production function, the income shares would be constant over time. The production function cannot be determined without knowing how real GDP changed over time. Yes, you can tell by the way the income shares for each factor move in opposite directions over time. No, if it were a Cobb-Douglas production function, the income shares would change in the same direction over time.

Q5 Suppose that the following production function represents the economy of Chile: 2 Points Q5.1 Assuming Chile's national income equals $ 170 billion, what is real labor income? 1 Point Real labor income share is (in billion $): 102 (Enter your response as a whole number.) Q5.2 Assuming Chile's national income equals $ 170 billion, what is real capital income? 1 Point Capital income share is (in billion $): 68 (Enter your response as a whole number.) Q6 Suppose Japan has a GDP of $2 trillion, and that its national saving rate is 16% 1 Point Japan's national saving is (in billion $): 320 (Enter your response as a whole number.)

Q7 Assume you have saved $20,000 and that you are considering a couple of options. One of them is to use these funds as a down payment to buy a newly built house. The other one is to buy a U.S. savings bond. 1 Point Which option will add to the economy's capital stock? Buying a newly built house will add to residential investment and therefore add to GDP. Buying a savings bond will transfer funds to the U.S. government and therefore add to GDP. Both options will increase expenditures and thus add to GDP. Neither option adds to GDP.

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Q8 Consider the (rather implausible) scenario in which the U.S. government phases out all Social Security transfers to retirees. 2 Points Given the phase out of Social Security transfers, the level of saving and investment will (A)_ and the real interest rate will (B)____ Q8.1 (A) 1 Point Q8.2 (B) 1 Point Increase Remain the same Decrease Increase Remain the same Decrease

Q9 The financial crisis that hit the United States first and then the world economy starting in fall 2007 meant that the future prospect of many firms looked gloomy at best for some time. 2 Points Given the financial crisis, the level of saving and investment will (A)_ and the real interest rate will (B)__ Q9.1 (A) 1 Point Q9.2 (B) 1 Point Increase Remain the same Decrease Increase Remain the same Decrease

Q10 On March 23, 2010, President Obama signed into law a major overhaul of the U.S. healthcare system. The Congressional Budget Oﬃce estimated that this legislation will reduce the U.S. government budget deficit by around $140 billion for the next 10 years. Assume the effect of this legislation on the saving curve. 2 Points Given the decrease in the U.S. government budget deficit, the level of saving and investment will (A)_ and the real interest rate will (B)__ Q10.1 (A) 1 Point Q10.2 (B) 1 Point Q11 Suppose Japan has a GDP of $4 trillion, and that its national saving rate is 16%. Assume Japan is an open economy. 1 Point If Japan's net exports are 3% of GDP, Japan's investment is (in $ billion): 520 (Enter your response as a whole number.) Increase Remain the same Decrease Increase Remain the same Decrease

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Q12 Consider the diagram of a small open economy as pictured below: 2 Points When the world real interest rate is 7%, the amount of net exports or capital outﬂows will be Q12.1 When the world real interest rate is 7%, the amount of net exports or capital outﬂows will be 1 Point -$300 billion $500 billion $300 billion -$500 billion

Q12.2 When the world real interest rate is 2%, the amount of net exports or capital outﬂows will be 1 Point -$300 billion $500 billion $300 billion -$500 billion

Q13 Consider a small open economy that is currently running a trade surplus. Assume the graph below is a representation of desired saving and investment in the small open economy. 1 Point Based on the current level of the world real interest rate, the real interest rate that would prevail if this were a closed economy is higher than the world real interest rate. True False

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Q14 If a country has a closed economy, a decrease in autonomous investment will 1 Point Q15 If a country has a small open economy, a decrease in autonomous investment will 1 Point shift the investment curve to the right, increasing the real interest rate and the levels of saving and investment, which will cause the economy's wealth to increase. cause a decrease in net exports and raise the real interest rate, which should decrease the economy's wealth. shift the investment curve to the left, decreasing the real interest rate and the levels of saving and investment, which will cause the economy's wealth to decline. shift the investment curve to the left, decreasing the real interest rate but increasing the levels of saving and investment, which will cause the economy's wealth to increase. cause a decrease in net exports and raise the real interest rate, which should decrease the economy's wealth. shift the investment curve to the left, decreasing the real interest rate but increasing the levels of saving and investment, which will cause the economy's wealth to increase. cause an increase in net exports and the economy buys more foreign assets, which should decrease the economy's wealth. cause an increase in net exports and the economy buys more foreign assets, which should not change the economy's wealth.

Q16 If a country has a large open economy, an increase in government surplus (or a decrease in government deficit) will 1 Point Q17 If a country has a small open economy, an increase in government surplus (or a decrease in government deficit) will 1 Point shift the saving curve to the left, which will decrease net exports, and the real interest rate remains the same. shift the saving curve to the left, which will decrease net exports, and the real interest rate increases. shift the saving curve to the right, which will increase net exports, and the real interest rate remains the same. shift the saving curve to the right, which will increase net exports, and the real interest rate decreases. shift the saving curve to the right, which will increase net exports, and the real interest rate remains the same. shift the saving curve to the right, which will increase net exports, and the real interest rate decreases. shift the saving curve to the left, which will decrease net exports, and the real interest rate remains the same. shift the saving curve to the left, which will decrease net exports, and the real interest rate increases. Graded HW_Chapter3&4 

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