...PLEASE HELP ME SOLVE THIS MACROECONOMIC QUESTION,,
ORIGINAL WORK PLEASE.
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2019/10/05 Introduction to Macroeconomics-Assignment #2 Please submit the hard copy of your answers before we start class on 2019/10/10 From 2010 to 201 1 a country's output rose from 20,000 to 25,000, its capital stock rose from 10,000 to 12.000, and its labor force declined from 12,000 to 9,000. Suppose the elasticity of output with respect to capital and labor are equal to 0.3 and 0.7, respectively. Answer the following questions based on the above information: a. How much did capital contribute to economic growth over the year? b. How much did labor contribute to economic growth over the year? C. How much did productivity contribute to economic growth over the year? In the Solow growth model, capital exhibits diminishing returns. In a basic endogenous growth model, capital exhibits constant returns. What is the main implication of these differences to economic growth of a country/countries? A company has an investment project that would cost $10 million today and yield a payoff of $15 million in 3 years, a) Should the firm undertake the project if the interest rate is 12 percent? 8 percent? b) Can you figure out the exact cutoff for the interest rate between profitability and nonprofit ability? According to an old myth, Native Americans sold the island of Manhattan about 400 years ago for $24. If they had invested this amount at an interest rate of 7 percent per year, how much would they have today? Suppose the Bureau of Labor Statistics of the "Republic of Santa Prisca" announced that in April 2010, of all adult population, 1.5 million were employed, 0.6 million were unemployed, and 0.4 million were not in the labor force. Use this information to calculate a) The adult population b) The labor force c) The labor-force participation rate d) The unemployment rate What advice would give someone who is structurally unemployed? What advice would you give someone who is cyclically unemployed? Some people have proposed an increase in retirement ages for South Koreans. Consider the effects of this proposed new policy. a. Show how the change would affect supply and demand in the market for loanable funds. b. How would this change affect the equilibrium interest rate and investment? c. In the long run, how would this affect real GDP in Korea Republic?Problem 2: Real Business Cycle Model Consider a real business cycle model similar to the one seen in class. The representative household wants to maximize his lifetime utility: U = Eo _ Bu (ct, It ) t=0 where, for simplicity, I have assumed constant population (Nt = N), and normalized N = H = 1. Notice that, to shorten the notation, I have denoted e ? by B e (0, 1) . As in class, ct stands for consumption, and It for labor. His budget constraint, in every period t, is the following: kt+1 = (1 - 6) k+ + Welt + Rickt - ct Assume that utility takes the following form: -e 1+x Ct u ( ct , it ) = b - for 0 > 0, b > 0, x >0 1+x Hence, utility increases with respect to consumption but decreases with respect to labor. Answer to the followings 1. Write the Lagrangian for this dynamic optimization problem. Then derive the first order conditions with respect to the household's choice variables: ct, l, and kt+1. 2. Using the first order conditions found in 1., derive the Euler equation for consumption. Provide a brief economic intuition for what it means.assume that the central banker will always act to maximize his own utility function, not society's. i.) Solve for the inflation rate and GDP when the central bank can and can- not commit to monetary policy in terms of the parameters a, b, COB, Yr. ii.) Use your solution from i.) to compute the utility of society in the case where the central banker can commit to monetary policy. Find the value of cos that maximizes society's welfare in this case. iii.) Use your solution from i.) to compute the utility of society in the case where the central banker cannot commit to monetary policy. Find the value of cos that maximizes society's welfare in this case. How does this compare to your answer in part ii.) (i.e. is it larger or smaller, what is its relation to society's parameter c)? What does this tell you about how central bankers should be chosen if there is a commitment problem?Chapter 1 1 198 Economic Consultants 11 Equilibrium Street Harrisburg, PA Dear Economic Consultant, My firm produces bicycles. The market price for the bicycles is currently $500, and we have been producing 13 bicycles per week. I don't believe that my firm could be doing any better producing any other level of output (we are currently breaking even). We are asking you to complete the following tasks for us: 1. I would like for you to look into our production choices and give us your expert opinion as to whether we could improve our weekly profit (see the cost schedule on the back). Please include the appropriate graphs in your discussion. If improvement is possible, let us know how many bicycles we should sell and what profit could we expect. 2. Also please make a short run supply schedule for our firm (assume that only whole bicycles can be produced). What quantity of bicycles should we supply at a market price of 200, 250, 300, 350, 400, 500, and 600? 3. Our market analysts believe that the demand for bicycles may fall in the near future. Currently, there are 100 firms in the industry that are identical to ours (which means each firm's supply decision is the same). We predict that, within our short run time frame, market demand will fall to the level indicated by the table below. Price $200 $250 $300 $350 $400 $500 $600 Market Qd 1800 1600 1400 1200 1000 600 200 Market Qs What will the new equilibrium market price be if demand falls? Given new price, how should we react to maximize profit in the short and long run? Please explain. 4. What will happen to the number of firms (increase, decrease, no change) in the bicycle industry in the short and long run? Discuss (illustrate discussion with the appropriate graphs). Please provide my firm with a typed report in which you analyze our situation and discuss the answers to all our questions by the time of our meeting on Thur 36th
