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Problems

Problems. Chapters 3,5,7. List of Suggested Problems. Chapter 3 Numerical Problems: 3a,b 4a Analytical Problems: 2 Chapter 4 Numerical Problems: 2a,b Analytical Problems: 7 Chapter 7 Numerical Problems: 1a, 3a Analytical Problems: 1. Chapter 3 Numerical Problem 3, Parts a,b.

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Problems

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  1. Problems Chapters 3,5,7

  2. List of Suggested Problems • Chapter 3Numerical Problems: 3a,b 4aAnalytical Problems: 2 • Chapter 4Numerical Problems: 2a,bAnalytical Problems: 7 • Chapter 7Numerical Problems: 1a, 3aAnalytical Problems: 1

  3. Chapter 3 Numerical Problem 3, Parts a,b

  4. Chapter 3 Numerical Problem 4a • The marginal product of labor is given by the equation below: • The price of output is $2 per unit • What is the quantity of labor demanded if A=1 and the nominal wage is $10?

  5. Chapter 3 Numerical Problem 4a (continue) • Profit maximization requires that labor be hired to the point where MRPN is just equal to W: • Solve for N: N = 95 • Plot the demand for labor:

  6. Chapter 3 Analytical Problem 2 • What are the effects of each event on the output? • A large number of immigrants arrive in the country (lower) • Energy supplies become depleted (lower) • New teaching techniques improve the educational performance of high school seniors (higher) • The new law mandates the shutdown of some unsafe forms of capital (lower)

  7. Chapter 4 Numerical Problem 2, Parts a,b

  8. Chapter 4 Analytical Problem 1 • For this question you are asked to use the saving investment diagram to analyze the effects of different events on saving investment in the real rate of interest. • Consumers decide to save more • The government announces a large one-time bonus payment to veterans returning from a war to be financed by future taxes • Government introduces an investment tax credit, but changes other taxes of total tax collections remain unchanged • A large number of oil deposits are discovered increasing the marginal product of capital and expected future income

  9. Chapter 7 Numerical Problem 1 • This problem simply involves plugging numbers into the money demand function • I will refer you to the answers that have been posted; I will not cover it in this review

  10. Chapter 7 Numerical Problem 3a • We are told that the quantity theory holds and that velocity is constant at 5, output is fixed at its full employment value of 10,000, and the price level is equal to 2. • Determine the real demand for money and the nominal demand for money

  11. Chapter 7 Numerical Problem 3a • Solve for M; M = 4000 • Solve for M/P; M/P=2000

  12. Chapter 7 Analytical Problem 1 • What are the effects of each on the demand for M1? The demand for M2? • Money market mutual funds become more checkable • Checkable home equity lines of credit are introduced • The stock market crashes—further declines are feared • Banks introduce overdraft protection featuring automatic savings to checking transfers • A crackdown reduces the illegal drug trade occurs

  13. The End

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