EP ECONOMICS,AP EDITION-CONNECT ACCESS
20th Edition
ISBN: 9780021403455
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 37, Problem 7RQ
Subpart (a):
To determine
Price and output.
Subpart (b):
To determine
Downward wage inflexibility.
Subpart (c):
To determine
GDP and money supply.
Subpart (d):
To determine
Relevance of monitory and fiscal policy.
Subpart (e):
To determine
Relevance of Fed.
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Students have asked these similar questions
Discuss the following statements:
a. The Keynesian multiplier is higher the higher is the degree of openness of the economy'.
b. 'There is no easy policy answer when it comes to dealing with a negative supply shock'.
Consider the following economy. The production function is F(K,L) = K0.3 Lº.7. The saving rate
and the depreciation rate are respectively: s = 0.10 and 8 = 0.07. Population growth is 1%, i.e.
n = 0.01.
c. Derive the capital accumulation equation for this economy.
d. Find the steady state value of the capital stock per capita.
e. Suppose that the initial capital stock per capita is: k = 1.5. Discuss the process of
convergence of the economy to the steady state using the appropriate diagram.
f. Calculate the optimal saving rate of the economy and discuss whether the economy at the
steady state over or under-accumulates capital.
8. Assume that (a) the price level is flexible
upward but not downward and (b) the
economy is currently operating at its
full-employment output. Other things
equal, how will each of the following
affect the equilibrium price level and
equilibrium level of real output in the
short run? L012.6
a. An increase in aggregate demand.
b. A decrease in aggregate supply, with
no change in aggregate demand.
c. Equal increases in aggregate demand
and aggregate supply.
d. A decrease in aggregate demand.
e. An increase in aggregate demand that
exceeds an increase in aggrega
supply.
Assume that the Phillips curve equation is represented by π = +0.1 - 2ut where π = 0-1. Suppose that
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Chapter 37 Solutions
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