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##### Consider a country that is characterized

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QUESTION 1;Consider a country that is characterized by the following production function;Y= 5K.5 L.5. Assume that the rate of depreciation as well as the rate of saving are each;.10. Also assume that there is no technological progress nor population growth.;a. What is the steady state level of capital per worker?;b. What is the steady state level of output per worker?;c. Suppose that the savings rate remains at.10 while the rate of depreciation increases to.20. What now happens to steady state level of capital per worker and output per worker?;QUESTION 2;Explain why the Lucas aggregate supply curve is steeper than the New Keynesian aggregate supply curve.;QUESTION 3;Suppose that the government of a country increases fiscal spending. According to the real business cycle theory, what will be the impact on the economy due to this change in government spending?;QUESTION 4;The production function of a country X is given by: y = 150n -.5n2;The demand for labor is given by: nd = 300 - 2.5 (W/P).;The supply of labor is given by: ns = 200 + 2.5 (W/P).;The expected price level is 2.;a. What is the equation of New Keynesian Aggregate Supply curve?;b. If the labor market had been of the New Classical model, what would the equation of the Lucas Aggregate Supply curve be?;QUESTION 5;What are the shortcomings of Statistics Canada's measurement of the unemployment rate?;QUESTION 6;Define the natural rate of unemployment. Discuss the factors that determine the natural rate of unemployment.;QUESTON 7;What is meant by the concept of the expected inflation rate? How does the expected inflation rate influence the actual inflation rate?;QUESTION 8;What are the key assumptions of the quantity theory of money? Assume that money supply has increased by 5%, real output has increased by 5%, and there has been no change in the velocity of money. What will be the rate of inflation?;QUESTION 9;Use an appropriate diagram to show the impact of a favorable oil shock on output and price level.;QUESTION 10;Is it possible to lower the inflation rate without increasing unemployment above the natural rate? Explain your answer.;QUESTION 11;An economy has the following short run aggregate supply and aggregate demand relations;ys = -2000 + 50 P;yd = 4000 - 50P;Calculate the following;a. Real GDP and price level.;b. If the money supply increases by 10% and it is anticipated, what is the new real GDP and price level?;c. What is new short run aggregate supply curve? Why has it changed?

Paper#27381 | Written in 18-Jul-2015

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