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Now we will solve for the steady state in a calibration of the US economy in 2000. In this problem, you will assume that the rate of growth of the work force is n = 0.017 and there is no exogenous technological progress. The aggregate production function for the US economy in 2000 is Y = (11.5)K 1/3 L 2/3 . The units are billions of 1996 dollars. A plausible value for the depreciation of the capital stock is δ= 0.036, and a good value for the national savings rate is σ= 0.16.
6. Use the formula r =f'(k) to calculate the steady-state rentals rate. Explain why the real interest rate is r-n-δ. (Hint: if you give up a unit of consumption, you can buy a unit of capital. That capital will yield f'(k) units of output next year, but a fraction δ is used up in production and another fraction n is needed for new workers.)
7. Is the US economy saving at the golden rule? What is the golden rule savings rate for our economy?
Elucidate the phenomenon of market foreclosure. Specifically, explain how a vertical merger may "substantially lessen competition or tend to create a monopoly".
After the firm's patent expires, predict the new market output and price. Assume that competing suppliers have the same economic costs as the original producer. Calculate the resulting change in consumer surplus.
Lawn mowing services are supplied by a host of individuals in the suburb of Westbrook-Algebraically determine the equilibrium industry price/output combination.
Some real estate economists have argued that anchor stores in shopping malls create significant externalities for overall sales.
Refer to the above data. If the product price is $95, at its optimal output will the firm realize an economic profit, break even, or incur an economic loss?
Explain why do economists believe that the CPI overstates the rate of inflation
Illustrate specific management principles and practices should PM company begin to put in place that will assist the company as their international expansion plans move forward and their international business begins to grow.
List four reasons why analyzing the economy is not as precise as the multiplier model makes it appear.
Using aggregate supply and aggregate demand examine, describe what effects, if any, the following changes have on each nation's Price Index and real GDP.
The year is 2007, and the price elasticity of driving on Dulles Toll Road is 1.6. The owners of Dulles Toll Road raise the cost of a one way trip to $8.50.
Illustrate what are the benefits of free trade. Who are the winners and losers when the government imposes tariffs and quotas.
Explain International Monetary System
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