Consider labor market in an economy. In a classical model, you can think that each worker...
Consider labor market in an economy. In a classical model, you can think that each worker comes with one unitof effort. In a Keynesian model effort makes a difference. Suppose that the efficiency wage is above labor market equilibrium. (a) Draw a graph where you can show both employment and unemployment predicted by each model. Discussunemployment under both models. (b) Now suppose a negative productivity shock hits the economy. How would employment and unemploymentchange under both Classical and Keynesian model. Show your results on a graph. (c) When the economy is hit by a negative productivity shock, workers are worried about their jobs and theystart working harder, that is they increase their effort, say from two to three. (Note that in the Classical model this is not possible. their effort level is still unity.) How would this affect employment, unemployment and output in the Keynesian model?
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Consider labor market in an economy. In a classical model, you
can think that each worker...
7. Suppose a shock hits the economy that abides by a Classical model and you observe...
7. Suppose a shock hits the economy that abides by a Classical model and you observe the following changes: . Overall output increases . Marginal productivity of workers decrease Which of the following could lead to these observations? A. Flood in Minnesota, which destroyed the production facility. B Invention of personal computers C. A huge lake was drained and new fertile land was revealed D. Immigrants get working visas and join the labor force. 8. Consider the labor demand curve...
4)If the economy is at full employment, a rise in net exports causes: A) An increase...
4)If the economy is at full employment, a rise in net exports causes: A) An increase in RGDP, no change in price in the AD/AS graph. B) Increase in prices in the AD/AS model with no change in the Keynesian model C) Increase in price, no change in RGDP in the Keynesian model D)Increase in RGDP and price level in both models. E) Increases RGDP and prices in Keynesian 5) What describes the difference between Keynesian and classical thinking? A)...
11. Consider an economy that abides by the standard classical model specifications. Suppose the economy experiences...
11. Consider an economy that abides by the standard classical model specifications. Suppose the economy experiences an earthquake that destroys a large amount of capital in the econ- omy (assume the population in unaffected and thus remains constant). Using graphs and written discussion, examine the economy dynamics in the wake of the shock Expectations are as follows: . Capture the timing in your written discussion If a curve shifts, explain why/economic intuition . If a market is in disequilibrium, explain...
9. Consider a Classical model with the following specifications in Q1, 2019: . Labor Supply: NS-1%,...
9. Consider a Classical model with the following specifications in Q1, 2019: . Labor Supply: NS-1%, Cobb-Douglas Production Function . The Quantity Theory of Money accurately describes aggregate demand, The Theory of Distribution holds, Parameter values: [y, a, A, K, M, V] [30,0.3, 130, 500, 2500,40]. Suppose a reduction in labor law regulations leads to an outward shift in labor supply, represented as an increase in y from 30 to 32 during Q2, 2019. Assume that everything else stays the...
Question 2 (40 points) Based on Classical model of labor market, how would each of the...
Question 2 (40 points) Based on Classical model of labor market, how would each of the following events affect full employment and the equilibrium real wage in the U.S.? Your answer should include graphs. A. (8 pts.) A large number of working-age immigrants enter the U.S. B. (8 pts.) Tighter environmental laws temporarily reduce the capital stock. (Assume that the effect on the MPN is the standard one.) C. (8 pts.) Workers start attending night school, which makes their expected...
Question 1 (42 p) Consider a closed economy where goods market and finalcial markets can be descr...
Question 1 (42 p) Consider a closed economy where goods market and finalcial markets can be described by the following equations for period t С,-100 + 0.5yo- 2000.25Y- 200r G- 100: T-200 Suppose inflation escpectations in this economy is based on past period's inflation rate, ie. Let Yo- FIN)-No the labor force is given as constant at LF- 1000. (4p) Write down the IS equation for this economy (4p) Assume a horizontal LM function where the Central Bank announces the...
consider a labor market experiment involving four buyers (firms) and four sellers (workers). Each firm seeks...
consider a labor market experiment involving four buyers (firms) and four sellers (workers). Each firm seeks to hire a single worker and each worker can work for a single firm. Each firm has a maximum revenue they can earn per worker hired. Each worker has a cost of working, which represents the value of his or her leisure time. Suppose the revenues from hiring a worker are $23, $15 and $21 and $17 for firms 1, 2, 3 and 4,...
A closed economy can be described by the long-run classical model: Y = 2KαL1–α C =...
A closed economy can be described by the long-run classical model: Y = 2KαL1–α C = 18500 + 0.75(Y – T) – 800r I(r) = 11000 – 1200r Note: r represents the real interest rate and is measured in percentage points (for example, if we find r = 10, then r is interpreted as being equal to 10%). Keep your answer to 4 decimal places if needed. Assume that there are two factors of production, capital (K) and labour (L),...
Please help with a and b. Thank You 3. (5 points) Labor market model - Exogenous...
Please help with a and b. Thank
You
3. (5 points) Labor market model - Exogenous vs endogenous markup a. (1 point) Let us first consider the wage- and price-setting relation as presented in your book. Graph the wage-setting and the price-setting relation on the same graph with the real wage on the vertical axis and the unemployment rate on the horizontal axis. Denote the level of the real wage and the level of the unemployment rate (you can call...
show both changes in graph and answer 2. Assume the economy is initially in equilibrium, and...
show both changes in graph and answer
2. Assume the economy is initially in equilibrium, and then firms expect future total factor productivity, z', to decrease. Using the New Keynesian Model framework, what are the implications on the following: a) Output supply increase / decrease / indeterminate / no change)? b) Output demand (increase / decrease / indeterminate/ no change)? c) Labor supply increase / decrease / indeterminate / no change)? d) Labor demand (increase / decrease / indeterminate/ no...
7. Suppose a shock hits the economy that abides by a Classical model and you observe the following changes: . Overall output increases . Marginal productivity of workers decrease Which of the following could lead to these observations? A. Flood in Minnesota, which destroyed the production facility. B Invention of personal computers C. A huge lake was drained and new fertile land was revealed D. Immigrants get working visas and join the labor force. 8. Consider the labor demand curve...
11. Consider an economy that abides by the standard classical model specifications. Suppose the economy experiences an earthquake that destroys a large amount of capital in the econ- omy (assume the population in unaffected and thus remains constant). Using graphs and written discussion, examine the economy dynamics in the wake of the shock Expectations are as follows: . Capture the timing in your written discussion If a curve shifts, explain why/economic intuition . If a market is in disequilibrium, explain...
9. Consider a Classical model with the following specifications in Q1, 2019: . Labor Supply: NS-1%, Cobb-Douglas Production Function . The Quantity Theory of Money accurately describes aggregate demand, The Theory of Distribution holds, Parameter values: [y, a, A, K, M, V] [30,0.3, 130, 500, 2500,40]. Suppose a reduction in labor law regulations leads to an outward shift in labor supply, represented as an increase in y from 30 to 32 during Q2, 2019. Assume that everything else stays the...
Question 2 (40 points) Based on Classical model of labor market, how would each of the following events affect full employment and the equilibrium real wage in the U.S.? Your answer should include graphs. A. (8 pts.) A large number of working-age immigrants enter the U.S. B. (8 pts.) Tighter environmental laws temporarily reduce the capital stock. (Assume that the effect on the MPN is the standard one.) C. (8 pts.) Workers start attending night school, which makes their expected...
Question 1 (42 p) Consider a closed economy where goods market and finalcial markets can be described by the following equations for period t С,-100 + 0.5yo- 2000.25Y- 200r G- 100: T-200 Suppose inflation escpectations in this economy is based on past period's inflation rate, ie. Let Yo- FIN)-No the labor force is given as constant at LF- 1000. (4p) Write down the IS equation for this economy (4p) Assume a horizontal LM function where the Central Bank announces the...
Please help with a and b. Thank
You
3. (5 points) Labor market model - Exogenous vs endogenous markup a. (1 point) Let us first consider the wage- and price-setting relation as presented in your book. Graph the wage-setting and the price-setting relation on the same graph with the real wage on the vertical axis and the unemployment rate on the horizontal axis. Denote the level of the real wage and the level of the unemployment rate (you can call...
show both changes in graph and answer
2. Assume the economy is initially in equilibrium, and then firms expect future total factor productivity, z', to decrease. Using the New Keynesian Model framework, what are the implications on the following: a) Output supply increase / decrease / indeterminate / no change)? b) Output demand (increase / decrease / indeterminate/ no change)? c) Labor supply increase / decrease / indeterminate / no change)? d) Labor demand (increase / decrease / indeterminate/ no...
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