Answer all the questions below and provide an explanation

5. Sam, who is 55 years old and has been a steelworker for 30 years, is unemployed because the steel plant in his town closed and moved to Mexico. Sam is experiencing: A) cyclical unemployment. B) permanent unemployment. C) frictional unemployment. D) structural unemployment. 6. Planned investment spending is: A) actual investment in a period. B) investment spending minus depreciation in a period. C) investment spending that businesses plan to undertake during a period. D) always equal to saving.11. A course packet reading discussed in class attributed the slower adoption of smart cards for transactions in the US compared to rapid adoption in Europe to: A) Telephone calls were much more expensive in Europe in the 1980s B) Telephone calls were much less expensive in Europe in the 1980s C) Europeans have adopted new inventions of the electronic age faster than Americans D) Europeans have adopted new inventions of the electronic age slower than Americans 12. Long-run economic growth has been mostly dependent on: A) rising productivity. B) a low unemployment rate. C) an increase in the population which eventually leads to an increase in the labor population. D) countries following the rule of 70.1. Solow model in continuous time. Consider the Solow model in continuous time with pro- duction function y = f(k) satisfying the usual properties, constant savings rate s, depreciation rate 6, productivity growth g and employment growth n. (a) Use the implicit function theorem to show how an increase in s affects the steady state val- ues k*, y", c*. Does this change in s increase or decrease long run output and consumption per worker? Explain. Now consider the special case of a Cobb-Douglas production function f (k) = ko. (b) Derive expressions for the elasticities of capital and output with respect to the savings rate d log k* d log y* d log s d log s How do these depend on the curvature of the production function o? Explain. (c) Derive an exact solution for the time path k(t) of capital per effective worker. Now consider the specific numerical values o = 0.3, s = 0.2, 6 = 0.05, g = 0.02, n = 0.03. (d) Calculate and plot the time paths of k(t), y(t), c(t) starting from the initial condition k(0) = k*/2. How long is the half-life of convergence? (e) Now suppose that we are in steady state k(0) = k* when the savings rate suddenly increases to s = 0.22. Calculate and plot the time paths of k(t), y(t), c(t) in response to this change. Explain both the short-run and long-run dynamics of k(t), y(t), c(t). What if instead the savings rate had increased to s = 0.30? Do you think these are large or small effects on output? Explain.1. Solow model in continuous time. Consider the Solow model in continuous time with pro- duction function y = f(k) satisfying the usual properties, constant savings rate s, depreciation rate 6, productivity growth g and employment growth n. (a) Use the implicit function theorem to show how an increase in s affects the steady state val- ues k*, y", c*. Does this change in s increase or decrease long run output and consumption per worker? Explain. Now consider the special case of a Cobb-Douglas production function f (k) = ko. (b) Derive expressions for the elasticities of capital and output with respect to the savings rate d log k* d log y* d log s d log s How do these depend on the curvature of the production function o? Explain. (c) Derive an exact solution for the time path k(t) of capital per effective worker. Now consider the specific numerical values o = 0.3, s = 0.2, 6 = 0.05, g = 0.02, n = 0.03. (d) Calculate and plot the time paths of k(t), y(t), c(t) starting from the initial condition k(0) = k*/2. How long is the half-life of convergence? (e) Now suppose that we are in steady state k(0) = k* when the savings rate suddenly increases to s = 0.22. Calculate and plot the time paths of k(t), y(t), c(t) in response to this change. Explain both the short-run and long-run dynamics of k(t), y(t), c(t). What if instead the savings rate had increased to s = 0.30? Do you think these are large or small effects on output? Explain.13. Rising inventories usually indicate: A) an economy that grows unexpectedly. B) an economy that slows unexpectedly. C) an unexpected spurt in sales. D) an inflationary cycle. 14. Banks create money when they: A) make loans. B) take deposits. C) hold excess reserves. D) pay withdrawals to depositors. 15. An example of the frictionally unemployed is a(n): A) autoworker who is temporarily laid off because of a decline in sales. B) geologist who is permanently laid off from an oil company due to a new technological advance. C) worker at a fast-food restaurant who quits work and attends college. D) real estate agent who leaves a job in Texas and searches for a similar, higher- paying job in California.7. The marginal propensity to consume is: A) increasing if the marginal propensity to save is increasing. B) the proportion of total disposable income that the average family consumes. C) the change in consumer spending divided by the change in aggregate disposable income. D) the change in consumer spending minus the change in aggregate disposable income. 8. As a result of a decrease in the value of the dollar in relation to other currencies, American imports decrease and exports increase. Consequently, there is a (n): A) increase in short-run aggregate supply. B) decrease in the quantity of aggregate output supplied in the short run. C) increase in aggregate demand. D) decrease in the quantity of aggregate output demanded. 9. The money demand curve is: A) downward-sloping because the opportunity cost of holding money is inversely related to the interest rate. B) downward-sloping because the opportunity cost of holding money rises as the interest rate rises. C) downward-sloping because the opportunity cost of holding money rises as the interest rate falls. D) upward-sloping because the opportunity cost of holding money rises with the interest rate. 10. If technology advances, then: A) more output can be obtained from the same inputs. B) more inputs are needed to produce the same output. C) less output can be obtained from the same inputs. D) less output can be produced even with more inputs.2. Natural resource depletion in the Solow model. Consider a Solow model where output is given by the CRS production function Y(t) = K(t)"R(t)(A(t) L(t) )1--, 0 ( R(t ) = -OR(t) The rest of the model is as standard with constant savings rate s, depreciation rate 5, produc- tivity growth g and employment growth n. (a) Let gy(t) and gx(t) denote the growth rates of output and the capital stock. Derive a formula for gy(t) in terms of gx (t). (b) Let gy and go denote the growth rates of output and the capital stock along a balanced growth path. Show that along any balanced growth path gp = go. Solve for this growth rate. (c) Does the economy necessarily converge to a balanced growth path? Explain. (d) Now suppose instead that resources R(t) grew in line with population, R(t) = nR(t). Compare the long-run growth rate of the economy with resource depletion from part (b) to the long growth rate of this alternative economy without resource depletion. What would make this gap between the growth rates large? Explain.2. Natural resource depletion in the Solow model. Consider a Solow model where output is given by the CRS production function Y(t) = K(t)"R(t)(A(t) L(t) )1--, 0 ( R(t ) = -OR(t) The rest of the model is as standard with constant savings rate s, depreciation rate 5, produc- tivity growth g and employment growth n. (a) Let gy(t) and gx(t) denote the growth rates of output and the capital stock. Derive a formula for gy(t) in terms of gx (t). (b) Let gy and go denote the growth rates of output and the capital stock along a balanced growth path. Show that along any balanced growth path gp = go. Solve for this growth rate. (c) Does the economy necessarily converge to a balanced growth path? Explain. (d) Now suppose instead that resources R(t) grew in line with population, R(t) = nR(t). Compare the long-run growth rate of the economy with resource depletion from part (b) to the long growth rate of this alternative economy without resource depletion. What would make this gap between the growth rates large? Explain.1. Real GDP is nominal GDP adjusted for: A) double counting. B) changes in prices. C) population. D) imports. 2. What do a rubbernecking traffic jam and the paradox of thrift have in common? A) In both cases, individual behavior has large negative consequences for the whole of society. B) In both cases, seemingly bad behavior ends up harming everyone. C) In both cases, seemingly careless behavior leads to good times for all. D) In both cases, government intervention can only make matters worse. 3. Every year more and more purchases are made with credit cards on the Internet. Given this trend, all else equal, we would expect: A) the money demand curve to shift outward. B) the money demand curve to shift inward. C) a downward movement along a fixed money demand curve. D) an upward movement along a fixed money demand curve. 4. The course packet and the class lecture contrasted historical growth in real GDP per capita in the US compared to Argentina to A) slower; Argentina does not have such severely cold winter weather B) faster; Argentina has a tropical climate with poor soil and tropical diseases C) slower; Argentina encouraged land ownership by new immigrants but the US "robber barons" owned all the land in the US D) faster; the US encouraged land ownership by new immigrants but in Argentina Spanish colonists had large land holdings