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1- Consider and economy with the following production technology: Y = 9K1/3 L2/3 , where the aggregate capital stock is K=100, and aggregate labor is L=100. The price of output is 1. a) Compute the equilibrium wage and capital return. b) Compute total payments to labor and capital. c) Show Euler's Theorem holds, i.e. show that total payments to capital and labor equal the value of output. d) What share of output goes to labor and capital? e) Suppose there is an increase in L, what would be impact on wages and capital returns?
2- Consider an economy with the following production function Y = K1/3 L2/3 a) Write down the function of production per unit of labor. b) Determine the steady state level of capital, income and consumption (all per unit of labor) as a function of the savings rate and the depreciation rate. c) Suppose that the depreciation rates is 10% per year. Compute consumption per unit of labor for a savings rate of 0%, 10%, 20%, 30%, 40%, 50%, etc. What is the savings rate that maximizes consumption per unit of labor? d) Compute the net rate of return on capital in the steady state for all the savings rates of part (c). What is the relationship between the real rate of return on capital and consumption per unit of labor?
Economists believe that the current values of the deposit multiplier and the money multiplier are widely divergent. Why might these values differ at present? What (if anything) do you think must happen for them to converge once again?
It trades with a country that produces only cheese, and the currency of that country is crowns. The real exchange rate, e, equals 5 wedges of cheese per bottle of wine. The foreign price level is 20 crowns per wedge of cheese, and the domestic money ..
The Law of Demand states that the demand for a product is inversely related to the cost of such product.
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During the business cycle, we can expect supply side economic growth:
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If the number of labor hours increases by 10% and the number of hours of capital used decreases by 10%, what is the percentage change in output?
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A new OSHA rule requires that welders be given 2 hour break for every 2 hours of work to prevent carpel tunnel syndrome. Using production theory, explain what will happen to the capital labor ratio in both the short run (when capital is fixed) and..
no less than 1000 words excluding the title page bibliography and appendices.question 1. a study into the key
Suppose you have two goods, ice cream and macaroni(an inferior good to most people). show graphically what would happens when the price of the ice cream decreases and income increases.
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