Reference no: EM131388919
Suppose that we have a standard real intertemporal model with investment. The country experiences a natural disaster and the current capital stock K is greatly reduced. In other words, suppose that the representative firm begins the current period with a lower capital stock K. It is still the case that the economy will last for only two periods. Assume that the marginal product of labor MPN is increasing in K as in Lecture Note 4.
1) Graphically show the impact of the natural disaster on the representative firm’s current demand for labor.
2) Graphically show how the changes to labor demand curve from Part (1) affects the output supply curve. Show how the current output Y and the real interest rate r is impacted due to this shift of the output supply curve.
3) The decrease in K increases investment by the firm, because the future marginal product of capital will be higher. Graphically show how this impacts the output demand curve.
4) Combining the movements of output supply curve from Part (2) and the output demand curve from Part (3), show what happens to r and Y by comparing before and after the natural disaster. [Hint: The direction of the change of r should be very clear, while how Y changes will be ambiguous.]
5) Based on what you know how r changes from Part (4), graphically show how the labor supply curve changes. Combining this with the labor demand curve shift from Part (1), how does the w and N change as the result of this natural disaster?
|
Evaluate two evaluation instruments used in fabrics inc case
: Evaluate the two evaluation instruments used in the Fabrics, Inc. case. Discuss how the evaluation results should be used. Be sure to address internal and external validity of the measurements.
|
|
Unemployment and inflation under control
: Imagine that you are elected the Chairman of the Fed and your goal is to keep both unemployment and inflation under control. This means that unemployment should be at its natural rate (e.g. 5%) and inflation at/around 2%. Can you achieve the two goal..
|
|
Consumer chooses between christmas trees-christmas lights
: Which of the following statements is true if the consumer chooses between Christmas trees and Christmas lights:
|
|
Analyze data sets and uncover important information used
: BUS461- You have applied a variety of methods to analyze data sets and uncover important information used in decision making. Having a good understanding of these topics is important to be able to apply them in real-life applications.
|
|
Disaster on representative firm current demand for labor
: Suppose that we have a standard real intertemporal model with investment. The country experiences a natural disaster and the current capital stock K is greatly reduced. In other words, suppose that the representative firm begins the current period wi..
|
|
Simplified balance sheet of commercial bank
: Consider the following simplified balance sheet of a commercial bank: ASSETS LIABILITIES Vault cash $200 $3500 Deposits Deposits at the Federal Reserve $300 Loans $3000 The required reserve ratio is 10 percent. Find Actual Reserves $ , Required Reser..
|
|
Office with economic proposals that focused on businesses
: Ronald Reagan ran for office with economic proposals that focused on businesses. The idea was that favorable tax policies and less regulation would make it easier/more profitable for firms to produce. Circumstances didn't really let these policies be..
|
|
Decision maker uses game theory when developing strategies
: Think of a strategy pursued by the company your work for, another company, or even a sports team. How can game theory help improve the outcomes for the decision makers? Explain whether simultaneous-move, repeated-move, or sequential-move games are mo..
|