maw

Review the Romer model as summarized in the table 6.1 of the book (or in our lecture notes). Now suppose the parameters of the model take the following values: o = 100, = 0.06, z = 1/3000, and I = 1000. a) What is the growth rate of output per person in this economy. b) What is the initial level of output per person? What is the level of output per person after 100 years? c) Now consider the following changes one at a time: a doubling of the initial stock of knowledge o, a doubling of the research share I, a doubling of research productivity , and a doubling of the population L. How would your answer to parts (a) and (b) change in each case? Plot output per capita on a ratio scale and provide the economic intuition for your results.

Suppose the parameters of the Romer model, as presented in class, take the following values: o = 100,7 = 0.10, z = 1/500, and L = 100. (a) What is the growth rate of output per person in this economy? (b) What is the initial level of output per person? What is the level of output per person after 100 years? (c) Suppose the research share of labor were to double. How would you answer parts (a) and (b)? (d) On a ratio scale graph, trace out the impact of part (c) on output per capita.

Suppose that an economy has the Phillips curve

= T-10.5 (u 5). -

a. What is the natural rate of unemployment?

b. Graph the short-run and long-run relation ships between inflation and unemployment.

c. How much cyclical unemployment is necessary to reduce inflation by 4 percentage points? Using Okun's law, compute the sacrifice ratio.

d. Inflation is running at 6 percent. The central bank wants to reduce it to 2 percent. Give two scenarios that will achieve that goal.

What are the types of utility

Discuss the solow growth model

A classical economy is described by the following equations:

cd=500+ 0.5(Y-T) - 100r.

Id=350 - 100r.

L = 0.5Y - 200i.

Y= 1850.

T = 0.05.

Government spending and taxes are equal where I = G = 200. The nominal money supply M = 3560.

(a) What are the equilibrium values of the real interest rate, the price level, consumption, and investment?

(b) Suppose an economic shock increases desired investment by 10, so it is now Id = 360 - 100r.

How does this affect the equilibrium values of the real interest rate, the price level, consumption, and investment?

(c) Returning to the initial situation in part (a), suppose an economic shock increases desired consumption by 10, so it is now cd=510+0.5 (Y-7) - 100r. How does this affect the equilibrium values of the real interest rate, the price level, consumption, and investment?

Consider the following model of the macroeconomy. All upper case letters are variables and all subscripted lower case variables are parameters (constants). The only exception to this is the interest rate i which is also a variable. Consumption (C) is given by: C=co+c(Y-T) (1) where Y is GDP and T is taxes, and Y-T is disposable national income. Investment is given by: (2) where i is the interest rate. Government spending G is fixed at G = 90 (3) Taxes are collected according to: T= to +1Y Demand for goods and services Z in the economy are given by: (4) Z=C+I+G (Real) money demand is given by: P = mY (5) (6) where again, Y is GDP and i is the interest rate. The (real) money supply M/P is not variable and is given by: M P = mo Equilibrium in financial markets is when real money supply equals real money demand. Equilibrium in the goods market is when demand for goods and services Z is equal to the amount of goods and services produced (i.e. GDP, Y). 1. Write this system of 9 linear equations (the 7 listed above plus the two market equilibrium equations provided in words) and 9 variables (Y, i,C, I, G, T, Z, M,) in matrix notation Az = d. Show your work. 2. Solve for the equilibrium value of GDP Y using Cramer's Rule. Show your work. 3. Solve the model (i.e. the matrix equation) for all variables in z (i.e. z = A-d). Show your work. 4. Suppose, alternatively, that the interest rate is an endogenous variable, but the price level is fixed exogenously at P=1. Consider, now, both the goods and money markets. a) (5 marks) What are the equilibrium values of Y and in this case? b) (5 marks) What is the value of the multiplier in this case?

The Boston Consulting Group (BCG) matrix was developed as a tool to develop business and marketing strategies. The BCG matrix measures a company's products strategic position and potential for growth to determine which ones should be invested in or terminated (Guest, 2019, p. 96).

The BCG matrix could be used to categorize business units by placing them in four different sections of the matrix, which represent a company's portfolios. The categories are stars, question marks, cash cows and dogs (Guest, 2019, pp. 96-97).

A business unit in the star category would have a good percentage of the market share in a rapidly expanding industry (Guest, 2019, pp. 96-97). They profit, but not without a great deal of investment. A business unit in the question mark category is a rapidly expanding industry but with a low percentage of market share (Guest, 2019, pp. 96-97). The dog category represents a business unit with a lower percentage of market share in an industry that is slowly growing (Guest, 2019, p. 96). In other words, a low-return business unit in an industry with very little expectation for future greater returns. The last category is a cash cow, and this is a business unit in a category with slower growth but a good percentage of the market share (Guest, 2019, pp. 96-97). Cash cows generate large profits with little investment and can be used to fund other business units.

In the Baldwin simulation company, we could apply BCG matrix tool and strategies to grow our company's business units and decide how to invest the limited funds. For example, if one of the products needs very little investment but generates huge returns then we could categorize that as a cash cow. The profits from that industry could be used to fund R&D for products in other industries with further analysis. We would need to make sure that we categorize the business unit for each category to make sure we invest the funds in areas with the greatest expected return on investment.

During the practice simulation it was difficult at first to determine which product would have the greatest chance of future success. Using a matrix like the BCG would make it easier to quickly evaluate products and industries to makes business investment decisions for our companies.

Review the Romer model as summarized in the table 6.1 of the book (or in our lecture notes). Now suppose the parameters of the model take the following values: o = 100, = 0.06, z = 1/3000, and I = 1000. a) What is the growth rate of output per person in this economy. b) What is the initial level of output per person? What is the level of output per person after 100 years? c) Now consider the following changes one at a time: a doubling of the initial stock of knowledge o, a doubling of the research share I, a doubling of research productivity , and a doubling of the population L. How would your answer to parts (a) and (b) change in each case? Plot output per capita on a ratio scale and provide the economic intuition for your results.

Long Run Growth: Consider the Romer model discussed in class. Output is produced using ideas and labor: Y = At Lyt. Ideas are generated using past ideas and labor: AAt At+1 At = 2At Lat =MMM Finally, the total amount of labor available is given by N = Lat +Lyt. (a) Suppose that a constant fraction of labor I is allocated to the technology sector. Show that ideas grow at a constant rate. If N = 1, 1 = 1/4, and z = 1/5, what is the growth rate of A?

(c) Combining Solow and Romer: Now suppose that the model includes capital as in the Solow model. Start the economy off on its balanced growth path with the growth rate given in part (a). Now suppose there is an increase in the savings rate from s to s' > s. Is the new balanced growth path higher or lower than the original (this can be demonstrated with the standard Solow Diagram)? Describe how the growth rate of capital will evolve over time. You should draw a figure with time on the horizontal axis and capital on the vertical axis.

Consider the following model, which is a variation of the combined Solow-Romer model: Yt = (1) (2) AAt+1 Lyt + Lat = ZA Lat = Lat = I x. (3) (4) B.1.1 Consider nonrivalry and increasing returns. Explain the concept of nonrivalry. Which equation(s) state nonrivalry in this model? Is there a phenomenon called increasing returns in this model? If so, explain what roles increasing returns play in economic growth. B.1.2 Find the growth rate of knowledge in this economy. B.1.2 Find the growth rate of output and the growth rate of output per person. B.1.3 Suppose that 7 increases at t = 10. Make a graph to explain how output per person changes over time. To do so, the horizontal axis of your graph should be t (time), and the vertical axis should be output per person.

Review the Romer model as summarized in the table 6.1 of the book (or in our lecture notes). Now suppose the parameters of the model take the following values: o = 100, = 0.06, z = 1/3000, and I = 1000. a) What is the growth rate of output per person in this economy. b) What is the initial level of output per person? What is the level of output per person after 100 years? c) Now consider the following changes one at a time: a doubling of the initial stock of knowledge o, a doubling of the research share I, a doubling of research productivity , and a doubling of the population L. How would your answer to parts (a) and (b) change in each case? Plot output per capita on a ratio scale and provide the economic intuition for your results.

Suppose the parameters of the Romer model, as presented in class, take the following values: o = 100,7 = 0.10, z = 1/500, and L = 100. (a) What is the growth rate of output per person in this economy? (b) What is the initial level of output per person? What is the level of output per person after 100 years? (c) Suppose the research share of labor were to double. How would you answer parts (a) and (b)? (d) On a ratio scale graph, trace out the impact of part (c) on output per capita.

Suppose that an economy has the Phillips curve

= T-10.5 (u 5). -

a. What is the natural rate of unemployment?

b. Graph the short-run and long-run relation ships between inflation and unemployment.

c. How much cyclical unemployment is necessary to reduce inflation by 4 percentage points? Using Okun's law, compute the sacrifice ratio.

d. Inflation is running at 6 percent. The central bank wants to reduce it to 2 percent. Give two scenarios that will achieve that goal.

What are the types of utility

Discuss the solow growth model

A classical economy is described by the following equations:

cd=500+ 0.5(Y-T) - 100r.

Id=350 - 100r.

L = 0.5Y - 200i.

Y= 1850.

T = 0.05.

Government spending and taxes are equal where I = G = 200. The nominal money supply M = 3560.

(a) What are the equilibrium values of the real interest rate, the price level, consumption, and investment?

(b) Suppose an economic shock increases desired investment by 10, so it is now Id = 360 - 100r.

How does this affect the equilibrium values of the real interest rate, the price level, consumption, and investment?

(c) Returning to the initial situation in part (a), suppose an economic shock increases desired consumption by 10, so it is now cd=510+0.5 (Y-7) - 100r. How does this affect the equilibrium values of the real interest rate, the price level, consumption, and investment?

Consider the following model of the macroeconomy. All upper case letters are variables and all subscripted lower case variables are parameters (constants). The only exception to this is the interest rate i which is also a variable. Consumption (C) is given by: C=co+c(Y-T) (1) where Y is GDP and T is taxes, and Y-T is disposable national income. Investment is given by: (2) where i is the interest rate. Government spending G is fixed at G = 90 (3) Taxes are collected according to: T= to +1Y Demand for goods and services Z in the economy are given by: (4) Z=C+I+G (Real) money demand is given by: P = mY (5) (6) where again, Y is GDP and i is the interest rate. The (real) money supply M/P is not variable and is given by: M P = mo Equilibrium in financial markets is when real money supply equals real money demand. Equilibrium in the goods market is when demand for goods and services Z is equal to the amount of goods and services produced (i.e. GDP, Y). 1. Write this system of 9 linear equations (the 7 listed above plus the two market equilibrium equations provided in words) and 9 variables (Y, i,C, I, G, T, Z, M,) in matrix notation Az = d. Show your work. 2. Solve for the equilibrium value of GDP Y using Cramer's Rule. Show your work. 3. Solve the model (i.e. the matrix equation) for all variables in z (i.e. z = A-d). Show your work.

Derive the IS equation in this economy (expressing Y in terms of i). 2. (5 marks) Derive the LM equation in this economy (expressing i in terms of Y and P). 3. Suppose that the interest rate is fixed exogenously at i=0.05. Consider, for the moment, only the goods market. a) (5 marks) What is the equilibrium value of GDP (i.e., Y*) in this case? b) (5 marks) What is the value of the multiplier in this case? c) (5 marks) Derive the aggregate planned expenditure function in this case. Sketch the equilibrium on a Keynesian Cross diagram. 4. Suppose, alternatively, that the interest rate is an endogenous variable, but the price level is fixed exogenously at P=1. Consider, now, both the goods and money markets. a) (5 marks) What are the equilibrium values of Y and in this case? b) (5 marks) What is the value of the multiplier in this case?

[8:59 AM, 2/11/2022] flo: 1. (10p.) This question concerns experiments/randomization and OLS regression. An old question in medicine concerns the effect of smoking on mortality (the probability of dying). The causal effect is difficult to estimate in this case, since smoking status is not random.

a) Using potential outcomes notation, define the treatment effect of smoking (binary 0/1 variable) on mortality at the individual level.

b) Let potential outcomes as treated and untreated with smoking be written as Y1 and Y0 and let actual treatment status D be D=0 if not smoking and D=1 if smoking. Using counterfactual reasoning, define the ATET (Average Treatment Effect on the Treated) and the ATE (Average Treatment Effect). Also explain each part of the equations in your own words.

c) Lets say that you in the absence of randomization, try to estimate the effect of smoking by comparing average mortality rates between smokers and non-smokers (neglect any controls for now). Derive an expression for the potential omitted variable bias that could arise from such a comparison. Explain each part of the resulting equation in your own words.

d) Give examples that would give rise to both an upward and downward bias and explain what direction of the bias you find most likely in this empirical case.

e) Assume now that you could randomize your population into smokers and nonsmokers and follow up mortality rates later in life. Explain why and how this would remove the types of bias that you addressed/mentioned in the previous question.

f) More realistically, it may be possible to randomize policies that affect smoking, such as free smoking cessation help or counselling to stop smoking. Assume that you are able to randomize the access to smoking cessation products. Assume also that you have data on the actual uptake of the smoking cessation products in both groups. Set up the ideal experiment to answer whether stop smoking decreases mortality, given the above information? Discuss pitfalls/drawbacks to your design. Is it possible to get the actual treatment effect of smoking from the design above and, if so, how do you get it and how should the estimate be interpreted? Is it a problem for the latter design if people in the control group also buy smoking cessation products?

2. This question concerns OLS regressions and the inclusion of covariates. Economic theory, such as the schooling model first analysed by Mincer (1958), postulates that there should be a positive return to schooling, such that investment in education results in higher earnings. The intuition is that schooling increases human capital, which in turn raises the productivity of a worker. Profit maximizing employers then pay a higher salary to more productive workers. In other words, more educated workers will earn a higher salary. Assume that you have conducted a randomized trial to investigate the effect of schooling on earnings, i.e. the hypothesis derived from theory. Thus, you have been able to randomize the number of years in school across individuals. Also, assume that the following additional covariates are available for each individual in the experiment: age, gender, municipality of residence, and occupation, as well as the parent's level of education.

a) Write down the OLS equation that you would regress to estimates the causal effect of schooling on earning. Explain in your own words, using the equation, why it in principle is not necessary to include any additional covariates into the model. Also, give two reasons why you still may want to include the covariates in the analysis. Explain the two reasons carefully.

b) Which of the covariates are "good" and which are "bad" controls among those listed above? Why and why not? Once you have identified the bad control(s), explain in you own words what the "bad control" prob... [9:26 AM, 2/11/2022] flo: ACCT 308 - Accounting Information Systems Excel Project Feral Wetsuits Company Year-End Worksheet

Introduction:

Accountants use Excel to analyze transactions and accounts, prepare financial statements, calculate budgets, create invoices, and many more tasks. Mastering the basics of Excel is critical to your success. You should already know how to create spreadsheets using common mathematical formulas and Excel Functions. In AIS, you will develop or improve your skills linking multiple spreadsheets; creating formulas using Excel functions IF, VLOOKUP, ROUND.

Feral Wetsuits Excel Assignment:

For this Excel assignment you will create a year-end workbook with multiple spreadsheets to convert the unadjusted trial balance of Feral Wetsuits to a set of complete financial statements and account analysis. You should recall the steps in the accounting cycle to 1) prepare an unadjusted trial balance, 2) determine and record adjustments, 3) create an adjusted trial balance, and 4) create financial statements: Balance Sheet, Income Statement, Statement of Cash Flows (Indirect method).

You will begin with the Year-end Worksheet template found on Cougar Courses that includes all the accounts and unadjusted trial balance figures. The instructions below give you the information needed to calculate and record adjustments in Excel, and to add these adjustments to the Year-end Worksheet to create the adjusted trial balance. You will use the adjusted trial balance data to create financial statements in Excel.

Your Excel workbook should be fully integrated. For example, a change in the tax rate from 15% to 17% should automatically update your tax expense/accrual adjustment, the adjusted trial balance, and the financial statements. Therefore, all calculations must be in Excel and all data should be referenced from one cell to another.

Instructions:

Download the Feral Year-end Workbook from Cougar Courses. Save the file as: lastname_firstname_FW2022SPRING.

You will note that the December 31, 2020 Post Closing Trial Balance and December 31, 2021 Unadjusted Trial Balance are populated with numbers.

a. Do debits equal credits? (These are just questions to make you think. No submission is necessary)

i. Use the SUM function to total each column of the spreadsheet. b. Should the 2021 allowance for doubtful accounts be a debit or credit

balance? i. How could this happen? You will make an adjustment later.

c. We will not close out the temporary accounts at this time.

3. ADJUSTMENT SHEET: Adjustments will be recorded on the Adjustment worksheet in the Excel Workbook.

Use the VLOOKUP function to populate account name after you input the account number. (Click on the hyperlink for support from Microsoft.com.) You might find using Labels/Range Names is helpful to define the account numbers and titles.

After each adjustment, write an explanation for the adjustment. Include any assumptions or calculation figures, such as bad debt expense rate or interest rate. This explanation is important documentation to support and justify the adjustment.

2021 Depreciation Expense is $35,109.50. Input this figure in the adjustments worksheet. Use the = to link the credit and debit cells.

Interest Expense: An $80,000, two-year note was signed and funded on December 16, 2020 with annual stated interest of 6% (that means interest starts accruing on December 17, 2021). Create a formula to calculate the adjustment amount based on a 365-day year. Use ROUND function to round to nearest penny. DO NOT TYPE IN A CALCULATED AMOUNT. Use the = to link the credit and debit cells.

Bad debt expense: Bad debt expense is 0.2% of net sales. Create a formula to calculate the adjustment amount. Use ROUND function to round to nearest penny. DO NOT TYPE IN A CALCULATED AMOUNT. Use the = to link the credit and debit cells.

Inventory and cost of sales adjustment: Feral Wetsuits Company uses the periodic inventory method. A physical inventory was taken at midnight on 12/31/21. The cost basis of the inventory on hand is $198,246.00. Adjust the inventory balance and close out the purchase and related accounts to cost of sales.

Income tax expense: Income tax expense cannot be calculated until all other adjustments are posted and the income before income taxes

reflects all adjustments. This will be calculated later in the

assignment. Use the = to link the credit and debit cells. h. Link the adjustments to the Year-end Worksheet in the Adjustments

columns. Since there is only one adjustment per account, you can do this by using the = or + functions. (In a more complex company with multiple adjustments for each account, you might use the SUMIF function to bring adjustments forward to the Year-end Worksheet.)

Use formulas to combine the Unadjusted Trial Balance and Adjustments to create the Adjusted Trial Balance. Many accounts can be either a net debit or a net credit in the Adjusted Trial Balance. Consequently, IF statements must be used to determine if the balance is a debit or credit. The IF statement should place a blank if the criteria are not met, for example, =IF (debits- credits>0, debits-credits, "")replace debits and credits with cell references for the unadjusted trial balance and the adjustment columns. Copy the formulas to all cells in the total columns.

After completing steps 3 and 4, you are ready to calculate income tax expense. A table is included on the Year-end Worksheet to help you calculate income tax expense.

Calculate income before income taxes using the Adjusted Trial Balance data. Income is equal to revenues minus expenses. In the accounting system, income is equal to credits minus debits. Create a formula in cell F59 on the Year-end Worksheet to calculate income before taxes, e.g., SUM(credits)-SUM(debits). (Do not bring income before tax from the income statement because you haven't created the income statement yet.)

The marginal income tax rates are as follows: Income before Tax Rate < $50,000 15% $50,000 to $75,000 25% >$75,000 36%

Use an IF statement to calculate income tax expense. The IF statement must consider income at 3 different levels. This requires an embedded or nested IF statement, i.e., 2 IF statements in one formula. (Be sure to test your IF statement at different levels of income before taxyour formula needs to work at all levels.)

After calculating tax expense, you can determine Net Income. The Net Income check figure is provided.

Create an adjustment for income tax expense on the Adjustment worksheet. The amount on the adjustment worksheet will be reference from cell F61 on the Year-end Worksheet. Bring the adjustment to the Year-end Worksheet in the adjustment columns.

All adjustments are now complete.

Populate the Balance Sheet and Income Statement debit and credit columns on the Year-end Worksheet using IF statements similar to step 4 above. Total Balance Sheet debits will not equal total creditswhy? The same conditions apply to the Income Statement. Calculate the difference below to compare to Net Income.

Complete the Financial Statements on the appropriate worksheets. The Statement of Cash Flows uses the indirect method.

a. Use formulas to insert the correct figures into the Financial Statements worksheets from the Year-end Worksheet balance sheet or income statement columns.

i. December 31, 2021 retained earnings in the Balance Sheet will pull from the Income Statement because the temporary accounts haven't been closed.

Calculations in the financial statements should be limited to sum, plus, and minus to aggregate or subtract accounts.

All amounts in the financial statements should be rounded to the nearest whole number (I.e., NO DECIMALS SHOWN)

On the Statement of Cash Flows, you can bring the balances from the Year-end Worksheet or the Balance Sheet and Income Statement, whichever you prefer.

Compare the ending cash balance on the Statement of Cash Flows to the Balance Sheet cash. The amounts should equal.

The Boston Consulting Group (BCG) matrix was developed as a tool to develop business and marketing strategies. The BCG matrix measures a company's products strategic position and potential for growth to determine which ones should be invested in or terminated (Guest, 2019, p. 96).

The BCG matrix could be used to categorize business units by placing them in four different sections of the matrix, which represent a company's portfolios. The categories are stars, question marks, cash cows and dogs (Guest, 2019, pp. 96-97).

A business unit in the star category would have a good percentage of the market share in a rapidly expanding industry (Guest, 2019, pp. 96-97). They profit, but not without a great deal of investment. A business unit in the question mark category is a rapidly expanding industry but with a low percentage of market share (Guest, 2019, pp. 96-97). The dog category represents a business unit with a lower percentage of market share in an industry that is slowly growing (Guest, 2019, p. 96). In other words, a low-return business unit in an industry with very little expectation for future greater returns. The last category is a cash cow, and this is a business unit in a category with slower growth but a good percentage of the market share (Guest, 2019, pp. 96-97). Cash cows generate large profits with little investment and can be used to fund other business units.

In the Baldwin simulation company, we could apply BCG matrix tool and strategies to grow our company's business units and decide how to invest the limited funds. For example, if one of the products needs very little investment but generates huge returns then we could categorize that as a cash cow. The profits from that industry could be used to fund R&D for products in other industries with further analysis. We would need to make sure that we categorize the business unit for each category to make sure we invest the funds in areas with the greatest expected return on investment.

During the practice simulation it was difficult at first to determine which product would have the greatest chance of future success. Using a matrix like the BCG would make it easier to quickly evaluate products and industries to makes business investment decisions for our companies.

Review the Romer model as summarized in the table 6.1 of the book (or in our lecture notes). Now suppose the parameters of the model take the following values: o = 100, = 0.06, z = 1/3000, and I = 1000. a) What is the growth rate of output per person in this economy. b) What is the initial level of output per person? What is the level of output per person after 100 years? c) Now consider the following changes one at a time: a doubling of the initial stock of knowledge o, a doubling of the research share I, a doubling of research productivity , and a doubling of the population L. How would your answer to parts (a) and (b) change in each case? Plot output per capita on a ratio scale and provide the economic intuition for your results.

Long Run Growth: Consider the Romer model discussed in class. Output is produced using ideas and labor: Y = At Lyt. Ideas are generated using past ideas and labor: AAt At+1 At = 2At Lat =MMM Finally, the total amount of labor available is given by N = Lat +Lyt. (a) Suppose that a constant fraction of labor I is allocated to the technology sector. Show that ideas grow at a constant rate. If N = 1, 1 = 1/4, and z = 1/5, what is the growth rate of A?

(c) Combining Solow and Romer: Now suppose that the model includes capital as in the Solow model. Start the economy off on its balanced growth path with the growth rate given in part (a). Now suppose there is an increase in the savings rate from s to s' > s. Is the new balanced growth path higher or lower than the original (this can be demonstrated with the standard Solow Diagram)? Describe how the growth rate of capital will evolve over time. You should draw a figure with time on the horizontal axis and capital on the vertical axis.

Consider the following model, which is a variation of the combined Solow-Romer model: Yt = (1) (2) AAt+1 Lyt + Lat = ZA Lat = Lat = I x. (3) (4) B.1.1 Consider nonrivalry and increasing returns. Explain the concept of nonrivalry. Which equation(s) state nonrivalry in this model? Is there a phenomenon called increasing returns in this model? If so, explain what roles increasing returns play in economic growth. B.1.2 Find the growth rate of knowledge in this economy. B.1.2 Find the growth rate of output and the growth rate of output per person. B.1.3 Suppose that 7 increases at t = 10. Make a graph to explain how output per person changes over time. To do so, the horizontal axis of your graph should be t (time), and the vertical axis should be output per person.

Review the Romer model as summarized in the table 6.1 of the book (or in our lecture notes). Now suppose the parameters of the model take the following values: o = 100, = 0.06, z = 1/3000, and I = 1000. a) What is the growth rate of output per person in this economy. b) What is the initial level of output per person? What is the level of output per person after 100 years? c) Now consider the following changes one at a time: a doubling of the initial stock of knowledge o, a doubling of the research share I, a doubling of research productivity , and a doubling of the population L. How would your answer to parts (a) and (b) change in each case? Plot output per capita on a ratio scale and provide the economic intuition for your results.

Suppose the parameters of the Romer model, as presented in class, take the following values: o = 100,7 = 0.10, z = 1/500, and L = 100. (a) What is the growth rate of output per person in this economy? (b) What is the initial level of output per person? What is the level of output per person after 100 years? (c) Suppose the research share of labor were to double. How would you answer parts (a) and (b)? (d) On a ratio scale graph, trace out the impact of part (c) on output per capita.

Suppose that an economy has the Phillips curve

= T-10.5 (u 5). -

a. What is the natural rate of unemployment?

b. Graph the short-run and long-run relation ships between inflation and unemployment.

c. How much cyclical unemployment is necessary to reduce inflation by 4 percentage points? Using Okun's law, compute the sacrifice ratio.

d. Inflation is running at 6 percent. The central bank wants to reduce it to 2 percent. Give two scenarios that will achieve that goal.

What are the types of utility

Discuss the solow growth model

A classical economy is described by the following equations:

cd=500+ 0.5(Y-T) - 100r.

Id=350 - 100r.

L = 0.5Y - 200i.

Y= 1850.

T = 0.05.

Government spending and taxes are equal where I = G = 200. The nominal money supply M = 3560.

(a) What are the equilibrium values of the real interest rate, the price level, consumption, and investment?

(b) Suppose an economic shock increases desired investment by 10, so it is now Id = 360 - 100r.

How does this affect the equilibrium values of the real interest rate, the price level, consumption, and investment?

(c) Returning to the initial situation in part (a), suppose an economic shock increases desired consumption by 10, so it is now cd=510+0.5 (Y-7) - 100r. How does this affect the equilibrium values of the real interest rate, the price level, consumption, and investment?

Consider the following model of the macroeconomy. All upper case letters are variables and all subscripted lower case variables are parameters (constants). The only exception to this is the interest rate i which is also a variable. Consumption (C) is given by: C=co+c(Y-T) (1) where Y is GDP and T is taxes, and Y-T is disposable national income. Investment is given by: (2) where i is the interest rate. Government spending G is fixed at G = 90 (3) Taxes are collected according to: T= to +1Y Demand for goods and services Z in the economy are given by: (4) Z=C+I+G (Real) money demand is given by: P = mY (5) (6) where again, Y is GDP and i is the interest rate. The (real) money supply M/P is not variable and is given by: M P = mo Equilibrium in financial markets is when real money supply equals real money demand. Equilibrium in the goods market is when demand for goods and services Z is equal to the amount of goods and services produced (i.e. GDP, Y). 1. Write this system of 9 linear equations (the 7 listed above plus the two market equilibrium equations provided in words) and 9 variables (Y, i,C, I, G, T, Z, M,) in matrix notation Az = d. Show your work. 2. Solve for the equilibrium value of GDP Y using Cramer's Rule. Show your work. 3. Solve the model (i.e. the matrix equation) for all variables in z (i.e. z = A-d). Show your work.

Derive the IS equation in this economy (expressing Y in terms of i). 2. (5 marks) Derive the LM equation in this economy (expressing i in terms of Y and P). 3. Suppose that the interest rate is fixed exogenously at i=0.05. Consider, for the moment, only the goods market. a) (5 marks) What is the equilibrium value of GDP (i.e., Y*) in this case? b) (5 marks) What is the value of the multiplier in this case? c) (5 marks) Derive the aggregate planned expenditure function in this case. Sketch the equilibrium on a Keynesian Cross diagram. 4. Suppose, alternatively, that the interest rate is an endogenous variable, but the price level is fixed exogenously at P=1. Consider, now, both the goods and money markets. a) (5 marks) What are the equilibrium values of Y and in this case? b) (5 marks) What is the value of the multiplier in this case?