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A typical economy is described by the following equations: • Y = K 0.5 L 0.5 (production function) • b) s = 0.2 (saving’s rate) • c) d = 0.1 (depreciation rate) Using the Solow model, answer the following questions: a. What are the steady state values of k, y, c and i ? b. What are the values of k and y if the economy operates at the “Golden Rule” level of capital accumulation? Imagine that you want to “drive” this country in the “Golden Rule” levels of k and y. What is the saving rate that you have to impose? What would be the level of c? c. Assuming that you impose the new saving rate. What would be the immediate and long run effects on c, k, and y? Draw the path of these variables. *Note: The lower case letters denote per-capita variables (e.g. y = Y/L, k = K/L etc.)
Which set of actions maximizes the total payoff of Nikita and Margaret? Is it likely that they will choose the payoff-maximizing actions without some communication? Why or why not?
How would you go about developing a value for k? What are the potential weaknesses of this model?
Derek consumes only rackets and tennis balls. His utility function is U(x,y)=x^2y^8, where x is the number of rackets consumed and y is the number of tennis balls consumed. Derek's income is $320, and the prices of rackets and tennis balls are $4 and..
What is cross elasticity of demand? How can it be used to tell if goods are substitutes for each other or complementary to each other? What is the rationing function of prices? Should health care be subject to this type of rationing? Be sure to comme..
Using the PPC as a springboard for your analysis, what effect would forgoing consumption today in order to invest for tomorrow have on future production possibilities? Now consider the choices our government faces when it has limited tax revenues to ..
What would the excess reserve be for the problem below? Devry Bank has $44,000 in demand deposits and $15,000 on total reserve with a 10 percent (i.e. 0.1) reserve requirement. How much can the bank loan out or what is the excess reserve? What’s the ..
10 consumers, ranked by their value for a network product v = 1...10, are deciding whether to connect to the network. If there are n people on the network, including oneself, then a consumer's willingness to pay equals n x v. What is the highest pric..
Most economists believe that, in the short run, an increase in the money supply will
Determine the total amounts of M1 and M2 based on the following data from July 2010: Currency held by individuals and businesses was $921 billion. Traveler's checks were $7 billion. Checkable deposits owned by individuals and businesses were $813 bil..
Where A,a, and b are positive constants. solve for the marginal products of capital and labor. for what values of a and b will production function exhibit diminishing marginal returns to capital and labor?
q.in 1950s mahjong was illegal in taiwan. given the enjoyment of playing such a fun game this is surely inefficient.
A public university wants to apply the concept of the WACC to developing its interest rate for analyzing capital projects. It has an endowment of $68 million which is earning 6.3% interest. It is paying 4.5% interest on $29 million in bonds. It belie..
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