Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 3, Problem 1AP
a)
To determine
The impact of an increase in total factor productivity on the graph of production function relating output to capital and output to labor.
b)
To determine
To show: that a 10% increase in total factor productivity also increases the MPK and the MPN by 10% at any level of capital and labor.
c)
To determine
The effect of beneficial supply shock on MPK and MPN.
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Suppose you are a worker in the construction industry in the state ofToronto, Canada. The MPL in this industry is (see attached image) where KcĀ and LcĀ are the amounts of labor and capital, respectively, in the indus-try.
If Toronto has 30,000 construction workers and 120,000 units ofconstruction capital, what is your MPL)?
Ā
Note: Attached is the formula.
Suppose you observe that MPLĀ > APLĀ and MPLĀ is decreasing but positive as more labor is used. Based on this, you can say that TP is ______ at______ rate, and APLĀ must be ______.Ā Please show your work clearly! Thank you!
increasing; a decreasing; increasing
increasing; a decreasing; decreasing
increasing; an increasing; decreasing
decreasing; a decreasing; decreasing
decreasing; increasing; increasing
Q 1. Given the following production function
Where;
Y is the total output of the economy
K is the amount of land, andĀ
L is the labor force of the economy
Assume A=1 and ļ” = 0.5
The initial values of K and L is 100 units.
a. How much output does the economy produce?
b. What are the wage and rental price of land?
c. What share of output does land receive?
d. If a flood damaged half of the land, what is the new level of output in the economy?
e. What is the new level of wage and rent?
f. What share of output does land receiving now?
Ā
Q 2. Suppose in an economy, people hold currency worth of 10,000 Rs and 4000 Rs worth ofĀ
demand deposits in the only bank. The reserve-deposit ratio is 20%.Ā
a. What is money supply, monetary base and money multiplier?
b. Suppose the economy only bank is a simple bank. It takes deposits and make loans andĀ has no capital. Show the balance sheet of the bank.
c. The central bank wants to increase the money supply. Should it buy or sell the GovtĀ bonds in theā¦
Chapter 3 Solutions
Macroeconomics
Ch. 3 - Prob. 1RQCh. 3 - Prob. 2RQCh. 3 - Prob. 3RQCh. 3 - Prob. 4RQCh. 3 - Prob. 5RQCh. 3 - Prob. 6RQCh. 3 - Prob. 7RQCh. 3 - Prob. 8RQCh. 3 - Prob. 9RQCh. 3 - Prob. 10RQ
Ch. 3 - Prob. 11RQCh. 3 - Prob. 12RQCh. 3 - Prob. 13RQCh. 3 - Prob. 14RQCh. 3 - Prob. 15RQCh. 3 - Prob. 1NPCh. 3 - Prob. 2NPCh. 3 - Prob. 3NPCh. 3 - Prob. 4NPCh. 3 - Prob. 5NPCh. 3 - Prob. 6NPCh. 3 - Prob. 7NPCh. 3 - Prob. 8NPCh. 3 - Prob. 9NPCh. 3 - Prob. 10NPCh. 3 - Prob. 1APCh. 3 - Prob. 2APCh. 3 - Prob. 3APCh. 3 - Prob. 4APCh. 3 - Prob. 5APCh. 3 - Prob. 6APCh. 3 - Prob. 7AP
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Similar questions
- compute the marginal product of capital (MPK) and the marginal product of capital (MPL) ofĀ a. Q=3 K0.4+4 L0.3arrow_forwardConsider a competitive, closed economy with a Cobb-Douglas production function with parameter Ī± = 0.25. The parameter A is equal to 60. Assume also that capital is 100, labor is 100. Ā Calculate GDP (Y) for this economy. Does the production function exhibit constant returns to scale? Demonstrate with examples. Determine if the production function exhibits diminishing marginal returns to capital. Demonstrate with calculus What is the real wage in this economy? What share of GDP will go to labor in this economy?arrow_forwardSuppose that capital's and labor's share of income are 0.3 and 0.7, respectively. What would be the effect on output given that there is an increase in the capital stock by 10%?arrow_forward
- Q1. Suppose we are given the constant returns-to-scale CES production function q = [k + l]1/ where k represents capital and l represents labora. a. Show that MPk = (q/k)1 and MPl = (q/l)1 . b. Show that RTS = (k/l)1 ; use this to show that elasticity of substitution between labor and capital= 1/(1 ā ). c. Determine the output elasticities for k and l; and show that their sum equals 1.Note: Output elasticity measures the response of change in q to a change in any input. Elasticity of output wrt k is eq,k = %q/%k = (q/k)*(k/q) or (q/k)*(k/q) or lnq/lnkSimilarly for elasticity of output wrt l, eq,ld. Prove that q/l = (q/l) and hence that ln(q/l) = ln(q/l)arrow_forwardGive typing answer with explanation and conclusionĀ Production function Y=8*K^.33*L^.66 Now what if there is skill biased technological change that makes capital more productive relative to labor such that alpha or the exponent on K rises to .5 and the exponent on L falls to .5 By what % does real wage change? By what % does R/P change?arrow_forward14. If output is described by the production function Y = AK0.2L0.8, then the production function has: Select one: A. Constant returns to scale and the share of labor in GDP is 0.2. B. increasing returns to scale and the share of labor in GDP is 0.2. C. Decreasing returns to scale and the share of labor in GDP is 0.8. D. constant returns to scale and the share of labor in GDP is 0.8.arrow_forward
- The relation between technology and the quantity of factor inputs to Real GDP is specified by the production function. O True O FalseĀ Note:- Please avoid using ChatGPT and refrain from providing handwritten solutions; otherwise, I will definitely give a downvote. Also, be mindful of plagiarism. Answer completely and accurate answer. Rest assured, you will receive an upvote if the answer is accurate.arrow_forward1. Supose thatĀ·Total Factor Productivity increasesĀ·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 effectarrow_forwardQ1. Suppose we are given the constant returns-to-scale CES production function q = [k + l]1/ where krepresents capital and l represents labora. Show that MPk = (q/k)1 and MPl = (q/l)1 .b. Show that RTS = (k/l)1 ; use this to show that elasticity of substitution between labor and capital= 1/(1 ā ).c. Determine the output elasticities for k and l; and show that their sum equals 1.Note: Output elasticity measures the response of change in q to a change in any input.Elasticity of output wrt k is eq,k = %q/%k = (q/k)*(k/q) or (q/k)*(k/q) or lnq/lnkSimilarly for elasticity of output wrt l, eq,ld. Prove that q/l = (q/l) and hence that ln(q/l) = ln(q/l)Q2. Suppose the production of airframes is characterized by a CobbDouglas production function: Q =LK. The marginal products for this production function are MPL = K and MPK = L. Suppose the price oflabor is $10 per unit and the price of capital is $1 per unit. Find the cost-minimizing combination of labor and capital if the manufacturer wants toā¦arrow_forward
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