Question

the domestic interest rate would leduction in E C) an increase in E D) an increase in investment E) none of the above Answer Questions (30 points, 20 questions, 1.5 points for cach question) 1. For this question this question, assume that the economy is initially operating at the natural level of output. A monetary expansion will cause in the real wage in the medium run. con will cause (increase/decrease/no change) 2. Use the following information to answer the questions below: (a) The rate of depreciation (8) is 10% per year; (b) the population growth rate () is 1% per year; (c) the growth rate of technology (8.) is 4% per year. answer the questions below: Given this information, we know that the effective labor (NA) grows at the rate o_ . The steady-state growth rate of output per effective worker (Y/(NA)) _. The steady-state growth rate of per worker (Y/N) is The steady-state growth rate of aggregate output Yis . 3. In the Solow growth model, an increase in the population growth rate will lead to a (fall/rise) in the steady-state capital-labor ratio and a (fall/rise) in output per worker. 4. When the saving rate is less than the golden rule saving rate, steady-state consumption per worker (decreases/increases) in the saving rate. When the saving rate is greater than the golden-rule saving rate, steady-state

Answer 1

1) no change

in long run, monetary Expansion doesn't affect the real variables .

Only nominal variables are affected

So only price will rise,

Real wages will remain unchanged in Long (medium ) run

& Fall in short run,

In medium run, workers demand rise in nominal wages, in a way, so that purchasing power ( real wages) are maintained at initial level

2)

A) growth rate of NA = growth rate of N + growth rate of A

= 1+4

= 5%

B).per effective worker output growth rate = 0%

C) per capita output growth rate = technology growth rate

= 4%

D) total output growth rate = population growth rate + technology growth rate

= 1+4

= 5%

3) fall

& Fall

at steady state

sy = (d+n+g)k

So,

Let y = k^a

Then , k^(1-a) = (s/(d+n+g))

( k = K/L)

So, k falls, as n rises ( population growth rate )

As k falls, y falls

4) as in golden State, Consumption per worker is maximum

So if current saving rate is less than golden rule, so as s rises , C/N will continue to rise & will be maximum at golden rule

So steady state Consumption per worker increases in s