Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 3, Problem 2NP
(a)
To determine
Graphical relationship between output and capital, keeping labor constant at given current value. MPK and its returns to scale.
(b)
To determine
Graphical relationship between output and labor, keeping capital constant at given current value. MPL and its returns to scale.
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Q 1. Given the following production function
Where;
Y is the total output of the economy
K is the amount of land, and
L is the labor force of the economy
Assume A=1 and = 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?
Q 2. Suppose in an economy, people hold currency worth of 10,000 Rs and 4000 Rs worth of
demand deposits in the only bank. The reserve-deposit ratio is 20%.
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 and 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 Govt bonds in the…
Consider a competitive, closed economy with a Cobb-Douglas production function with parameter α = 0.25. The parameter A is equal to 60. Assume also that capital is 100, labor is 100.
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?
Consider three inputs of production: labour, physical capital and natural resources, and an economy with decreasing returns to scale. If you increase all three inputs x times then the total gross domestic product (GDP) in the economy will increase exactly x times, but GDP per capita will decrease
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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